Who Will Pay For Health Care Reform?

James Sherk / July 14, 2009

As Congress debates health care reform and how to pay for it, the Congressional Budget Office reported today on something that economists have long known: ordinary workers – not their employers – will be paying for it. How can that be, when employers pay the lion’s share of health insurance premiums? Although workers do not physically write a check for the full cost of their health benefits, their employers write a smaller check to them every pay period. Workers pay for health benefits through lower wages. As the CBO explains:

Although employers directly pay most of the costs of their workers’ health insurance, the available evidence indicates that active workers—as a group—ultimately bear those costs. Employers’ payments for health insurance are one form of compensation, along with wages, pension contributions, and other benefits. Firms decide how much labor to employ on the basis of the total cost of compensation and choose the composition of that compensation on the basis of what their workers generally prefer. Employers who offer to pay for health insurance thus pay less in wages and other forms of compensation than they otherwise would, keeping total compensation about the same. (more…)