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…in California, a $7,500 deduction for a young individual exceeds their cost for a bare-bones insurance plan by a factor of five. In that case, you can expect young employees to go their employees and demand a few thousand dollars more in cash and then opt out of the health insurance benefit, and take the full tax deduction. What happens next? Well the employer’s risk pool fractures, leaving only those employees whose insurance costs much more than the average looking to the employer for coverage. The likely result is that those employers offering insurance on the margin will give all their employees cash, and then tell them to go fend for themselves in the individual market. This won’t affect members of Congress, high-priced lawyers and investment bankers, but it will be a big deal for those employees who were getting decent benefits at work but now forced to go cap in hand to the underwritten individual market — a market place where pooling risk is a dirty word.br> On the other hand, employment-based coverage is already declining because it is too costly. And one reason it is too costly is that younger, healthier employees are turning down the health insurance offered by their employers. As the Cato Institute’s Michael Cannon put it, “healthy people realize they’re being ripped off and they want out.” Should the President’s plan result in lower costs for health insurance, employers would be more able to offer it and younger, healthier employees would be more likely to purchase it, leading to some preservation of the risk pool. p> The President’s Plan Is Behind the Times: Jonathan Cohn ends his reaction
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