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Editorial: State workers can’t afford to accept raises

It’s no wonder a majority of the state employees bargaining over a new union contract voted to send the proposal back to the table for more work. The way the contract is structured, most employees can’t afford to accept the state’s proposed cost-of-living raises, the first since 2009.

For workers with families, any gains received by raises of 1.5 percent next month, 2.25 percent in 2014 and 2.5 percent in 2015 would be more than offset by an increase in health insurance deductibles to $750 per family in 2014, with an additional increase to $1,000 per family in 2015. Only employees in the top labor grades would earn enough to more than cover the cost of the higher deductible. (The math is better for individuals, who would see a $500 deductible increase.)

The problems facing negotiators demonstrates why the link between wages and health-care benefits needs to be severed. The system has become regressive, in some cases horribly so. Since the proposal exempts preventive care, screenings and surgeries done in a physician’s office, only employees with a health problem of their own or a sick or injured family member will pay the deductible.

That means that the proposed system, and countless others like it across the nation, most penalizes those who both earn the least and must also struggle to cope with the cost, heartache and anxiety of accident or disease.

Health insurance as part of employee compensation began with the hiring of company doctors. About a century ago, companies began offering employees health insurance. The provision of health insurance in lieu of raises proliferated during World War II, when the National War Labor Board froze wages. Companies that wanted to compete for workers began doing so by offering better health benefits and they became part of union contracts. In time, because wages are taxed and health care benefits are not, the latter increased.

Wages are subject to payroll taxes, 6.2 percent each from worker and employer. Higher wages also increase employee pension benefits, so for decades it was cheaper for employers to increase benefits rather than worker pay. Workers accepted the deal because benefits, for the most part, aren’t subject to income taxes, which trim the take-home pay of most public workers by 15 to 25 percent.

The rapidly escalating cost of health care changed the equation. It has made providing generous health care coverage for employees much more expensive, in many cases prohibitively so; thus the move by employers to shift more of the cost of health insurance to employees. That shift is often couched as a means to discourage the insured from seeking unnecessary care, but the most comprehensive study of the effect of patient cost-sharing on utilization found that high deductibles reduced necessary and unnecessary care equally. The reduced utilization, as expected, was greatest among those with the smallest incomes.

The state’s proposed contract shifts $1,750 in risk to an employee with a family over the biennium. The increased deductible would come in exchange for a very modest increase in wages – an increase that wouldn’t bring most employees back to 2009 levels in real terms even without counting the deductible increase. The healthy and lucky would win, the ill and unlucky would lose. In general, older workers would lose, and younger and presumably healthy workers win.

That is not the kind of health-care system, or employee compensation system, that state employees or anyone else should have. Someday, Congress will recognize that.

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