Another moral hazard created by health care reform

Posted: June 2, 2010 in Health

There is that big moral hazard that encourages individuals to not buy insurance and instead pay the penalty since the penalty is less costly than insurance premiums and they can still get insurance if they really need it because the new law states that insurance companies cannot deny coverage due to pre-existing conditions. So that is the most direct and obvious moral hazard that has been created. There is another.

Along with other reasons that employers are being very cautious about hiring new employees there is the new mandate that they must provide health insurance for their employees, but they don’t have to do so for independent contractors. The trend toward hiring more contractors and fewer direct permanent employees has been growing for a while. Saving costs by making it easy to terminate and not having to pay for benefits and pensions has always been very attractive in cases that a business can maintain its core competencies with a smaller staff and hire contractors to do the heavy lifting. The new health care legislation adds another incentive to not hire permanent employees.

A government study estimated that in 2005 31% of U.S. workers were contingent workers, typically independent contractors. The trend continues to grow that number and within 10 years it could reach 40%. People on both sides of the equation, employers and workers, need to adapt and make the most of the new paradigm.

Advertisements

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s