Sign of Things to Come

A small business owner called to say he was converting each of his two divisions of 30-40 people to a defined contribution plan. He was faced with premium increases of 23% and 46% for the divisions and said his business couldn’t hack those hikes. Instead, he will opt out of coverage forthwith. He will give each employee and lump sum and tell them to either buy their own individual policies, default to BadgerCare (the Wisconsin version of Medicaid) or to HIRSP (the Wisconsin high risk pool). In either of the latter two cases, the taxpayers will be picking up a big chunk of the tab. Note: BadgerCare is running $1 billion in the red and is turning away applicants. It is already busted and about to become more busted. Some states will have to opt out of Medicaid to eliminate their huge deficits. Well designed state programs could cut their costs so dramatically, without a loss of benefits, that the move away from Medicaid will make economic sense. Medicaid recipients are not unionized, so such an innovation should be possible.

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