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Ending My Company’s Health Care Benefit

Since I hired my first full-time employee 15 years ago, I have always offered to pay for my staff’s health insurance. Employees received the same protection my family enjoyed, and if an insurer made life too difficult for anyone, we all switched.

This will soon change if the House of Representatives approves the health care overhaul that President Obama has made his top priority. The 20 of us who now work at Palisades Hudson are watching closely as Democratic leaders try to round up the votes they need for passage. The moment of truth could come in the next few days — or it may get pushed back if party whips cannot count on 216 sure-fire supporters.

The Democrats’ legislation would undercut both the rationale and the economics of our company-paid health benefits. It focuses on extending coverage to more than 30 million Americans who now lack it. That’s a great goal, but it does nothing for my firm, where everybody is already insured.

I need legislation that will help slow the spiral of rising insurance costs so I can continue to ensure that my little group is covered. But the Democrats’ plan has virtually nothing in it, apart from political charades like a federal insurance-rate oversight board, to slow the rise in costs. At the same time, by requiring all Americans to obtain coverage and offering subsidies to many to help them pay for it, the plan shifts this responsibility from the employer to the individual (with government help), where, to be honest, it really belongs. I never set out to be in the business of providing health insurance. If someone else is responsible for ensuring that our people are covered, I am happy to get out of it.

The Democrats’ legislation also would raise my taxes substantially to cover the costs of insuring those 30 million currently uninsured Americans and providing subsidies to others. This, of course, leaves me with less money to pay for salaries and benefits, including health insurance, for my staff.

I will gladly pay my share toward the health coverage of those who work for me — but I won’t pay twice. If Washington is going to tax me to subsidize health insurance for all Americans, then that’s what I will pay. Some of our lower-paid staff might qualify for those subsidies; more senior people probably will not. But they will all lose the company-provided benefit they now have.

In the end, it’s a bad deal for our little group and a good deal for those 30 million currently uninsured strangers. That is precisely how the health care overhaul is designed. As we have previously discussed, the Democrats’ plan is geared to provide broad coverage, not to control costs.

I now pay $575 to $683 per month to cover each member of our group. Employees who have families pay up to $1,350 extra to cover the difference between the individual and family premiums. These rates, which have been rising at a double-digit annual clip, are unpleasant but at least are manageable for the firm, given our small head count relative to the size of our business. My highest priority is to see rate relief for those who pay to cover their families. Unfortunately, the president’s plan is not going to give us that relief.

Why not have Palisades Hudson cover the cost of family coverage for employees who have families? Because I believe it is fundamentally unfair to reward two people who perform the same jobs equally well so differently. An employee with family coverage could have a benefit worth more than $15,000 annually, after taxes, more than an equally valuable employee who is single. That’s no way to run a business.

Instead, we have a mix of base salary, health and other benefits, bonuses and profit-sharing contributions, as well as overtime for non-management employees. This lets me try to compensate each employee fairly based upon what she or he contributes to the firm.

If the Democrats’ plan is enacted, I will stop paying for employee health coverage as soon as the higher taxes or individual mandates kick in. I might end our group insurance program entirely, since the legislation gives all individuals the right to buy coverage on new government-run exchanges regardless of any pre-existing conditions. More likely, however, is that I would keep the existing program but would require employees who want the coverage to pay for it themselves through pre-tax payroll deductions.

I also probably will make some adjustments to our pay scale, especially at the low end, to cushion the financial impact on our staff. But our employees should not (and do not) expect to be made whole. The higher taxes hitting our business will see to that. As I said, I won’t pay twice.

So much for the administration-inspired myth that the Democrats’ health care overhaul will be paid for by higher taxes on insurers and “the rich,” meaning, among others, business owners like me. Directly or indirectly, a decision to expand coverage to millions more people without offsetting cost controls is going to affect almost everyone. Our situation at Palisades Hudson is one example of how that will happen.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us,” and Chapter 4, “The Family Business.” Larry was also among the authors of the firm’s book The High Achiever’s Guide To Wealth.

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