Contraception, religious freedom and employee health insurance
Governor Jay Nixon’s recent veto of Senate Bill 749 requiring that health insurance companies offer policies that exclude family planning coverage to employers with religious objections is sure to re-ignite the debate surrounding a federal mandate that health insurance coverage include contraception and sterilization services.
According to its opponents, the mandate violates the liberty of employers by requiring that they foot the bill for health care services that are incompatible with their religious beliefs. Consequently, the governor’s veto has disappointed the likes of Missouri Catholic Conference Executive Director Mike Hoey who supported SB 749 because it “protects religious liberty in Missouri.”
As a male, I am careful to avoid offering unsolicited opinions about the morality of contraception or abortion (especially in mixed company), and, not being Catholic, I wouldn’t dream of questioning the beliefs of my many Catholic friends on the topic.
But, as an economist, I can offer a perspective that could shed a bit of light on the contraception coverage issue.
Economic analysis of the market for health insurance leads to a surprising and useful insight – employers do not actually pay for the health insurance coverage they provide to their employees. Instead, they collect funds that would otherwise have been paid to employees as wage or salary income and use those funds to purchase health insurance on their behalf.
My employer – a local, private university – offers health insurance as part of its compensation package for the same reasons many other firms do…health insurance benefits are not subject to federal or state income taxes, and similar coverage purchased individually by employees with after-tax dollars would be much more expensive.
Employer-provided health insurance is a fringe benefit much like employer matching retirement plans, sick leave, or paid vacation days. All are part of a broad compensation package. Economic theory and evidence show that – with the exception of smaller employers whose workers are paid relatively low wages – employees bear the full burden (in terms of lower wages or salaries) of their employer-provided health insurance benefits.
Many employees have learned this economic lesson first-hand over the last few decades when they were told that their annual raises must be sacrificed in order to cover rapid increases in health insurance costs.
How does this impact the debate over religious freedom v. contraception coverage?
Employers have no right on religious (or any other grounds) to tell an employee that she cannot buy contraceptives (or any other legal products) with her own wages to use on her own time.
The mistaken belief that employer-provided health insurance is different because the employer “pays for it” has created a controversy where none should exist.
The content of my shopping cart does not have to comply with my employer’s theology. Why should my health insurance claims?
Steve D. Mullins is a professor of economics at the Breech School of Business Administration, Drury University in Springfield, MO.
Yanwen Xia
Overland Park
11 months, 1 week ago“they collect funds that would otherwise have been paid to employees as wage or salary income and use those funds to purchase health insurance on their behalf.”
Are you saying that the employees would have been paid more if they were not provided health insurance by their employers? You know clearly this is not guaranteed. If that is true, the employees should be given the choice between having medical insurance and a large paycheck. But I have not heard of such options.
James M Smith
11 months agoYes Yanwen that is exactly the option you have with employer provided healthcare. It is optional. If you want it you have to pay for it with money from your paycheck before taxes are taken off. If you don’t want it then you don’t pay for it i.e. you get a bigger paycheck.
George Hunsucker
Northland
11 months agoSo Mr. Mullins, the FACT that businesses spend money to negotiate and in some cases administer these plans,(A COST TO THE BUSINESS), doesn’[t come into play?
I disagree that a businessperson’s money that is spent to purchase healthcare magically belongs to the employee. It is the businessperson’s money and she/he should control how it is spent. In this case, if the businessperson does not want to spend money on contraception, then that is their right.
Mark Hastert
11 months ago“I disagree that a businessperson’s money that is spent to purchase healthcare magically belongs to the employee.”
Read more here: http://voices.kansascity.com/entries/contraception-religious-freedom-and-heath-insurance-who-pays-employees-health-insurance/#storylink=cpy
Fringe benefits e.g health insurance, PTO, etc. are part of your wages. You work for them. They are the same to the employer as the dollars they pay to you. In this case, because the whole debate on contraception is based on religious beliefs, the opponents are effectively forcing their employees to practice the religion of the employer with the employees own money.
Jon Whitehead
11 months agoProfessor Mullins is confusing “income taxation” with “ownership.” And in a smug way that implies religious employers don’t understand economic reality.
But an “employee benefit” doesn’t mean it’s the employee’s property. Imagine that every employer was required to provide the use of an immoral, gas-guzzling SUV to each employee. The Employee might pay for the gas or tires, and the employee will be taxed for the personal benefit derived from the employer’s expenses. But no one runs around saying the car is really the employee’s car.
Or imagine a law requiring halal or kosher butchers to butcher ham for any customer, too. Only Professor Mullins, through the miracle of economic analysis, would claim that the butcher has no reason to complain about what his customers eat.
The fact is, the government is requiring the employers to provide services they find unconscionable.
The lipstick of economic analysis doesn’t make this any less of a pig.
George Harris
Kansas City
11 months agoJon, the car, of course, belongs to the employer, who can set all kinds of restrictions on its use for business purposes only. But the employer can’t tell me where I can go on my earned vacation time. My employer isn’t lending me or giving me money for my health insurance. I earn that benefit just like I earn every dollar I’m paid directly. The benefits and the money aren’t the employer’s anymore once I’ve earned them. The cost of administering the insurance is really just part of the employee’s income as well, just paid indirectly. So is the employer’s contribution to FICA.
Mark Hastert
11 months ago“Or imagine a law requiring halal or kosher butchers to butcher ham for any customer, too.” Read more here: http://voices.kansascity.com/entries/contraception-religious-freedom-and-heath-insurance-who-pays-employees-health-insurance/#storylink=cpy
That’s exactly my point. If the employer dictates that the insurance must or must not have certain characteristics on the basis of religious doctrine that employer is effectively forcing their employees to practice that particular faith. That’s why religious practices should not be under consideration. It’s a part of the employees compensation and there’s to decide. The religious practices argument being used by the Bishops applies to them as well.
Steve Mullins
11 months agoI appreciate the comments. This response is for Mr. Whitehead who said “Professor Mullins is confusing “income taxation” with “ownership.” And in a smug way that implies religious employers don’t understand economic reality.”
Read more here: http://voices.kansascity.com/entries/contraception-religious-freedom-and-heath-insurance-who-pays-employees-health-insurance/#storylink=cpy
My apologies if my essay came off as ‘smug’…it certainly was not my intent. When I mentioned the ‘surprising’ conclusion that EPHI actually comes out of the employees other compensation I was just being honest about how obscure economic reality can sometimes be.
Economic analysis often leads to counter-intuitive conclusions. One example that usually surprises my students is the incidence of the federal payroll tax. Economists agree that in spite of the political window-dressing where the collection of the payroll tax is split 50/50 between the employer/employee, the actual burden falls entirely on the employee in the form of reduced after-tax pay.
It is hard for workers to see how this could be true because all they can observe is the payroll deduction on their pay stub..only 1/2 of the FICA tax. And employers sure as heck are aware of the funds they must send off to the Social Security Administration on the employees behalf.
What the employer and employee can not observe is the market level of wages that would exist in the absence of the FICA tax. The analysis is a bit to involved to go into in this forum, but you can find a full explanation in any Public Finance textbook.
Yanwen Xia
Overland Park
11 months agoHi James, I think you confuse (1) the take-home check and (2) the amount the employer pays you.
Your 401K and medical insurance will shrink your take-home check. But whether or not your buy insurance has nothing to do with your salary and will not change it, which is the fixed amount the employer agrees to pay you on your offer letter.
Throughout my two decades of employments, the amount of money paid to me by the companies has never been altered by the fact that I bought or not bought insurance. e.g if I am supposed to be paid $1000 per pay period, my company will not reward me with a penny more than $1000 if I choose not to buy med insurance.
Jon Whitehead
11 months agoGeorge, Mark & Steve:
We agree that economics can be counterintuitive, and some costs are fungible, and that employer-provided insurance is a substitute for wages, all things equal.
But it’s not correct to say employers don’t have any responsibility or control over fringe benefits once an employee is taxed on them.
Prof. Mullins seems to argue that law-makers could ignore religious employers who complain, because the employers are mistaken about the economics. I don’t think that’s fair or particularly economic.
In past generations, government might have wanted employers to cover sterilizations of the poor, or shock therapy for homosexuals, or to subsidize memberships in racist organizations. It would be unfair to tell any employer, then or now, “don’t worry, the economists say it’s not even really your expense.”
In a very real way, the employer is being required to offer or subsidize services against his or her conscience. Economists and lawmakers need to face that argument directly, not side-step it.