GE freezes pension benefits for 20k employees

https://www.businessinsider.com/general-electric-freezes-pension-benefits-for-20000-employees-2019-10

by jrwan • 7 years ago

170 246 7 years ago

Can someone explain what this means, and how its not illegal? Arent pensions a contract?

Pensions are very strange. IBM abolished its pension program some decade ago, replaced with a 401K funded to 25% or some such. Saved IBM billions; pissed off a generation of employees.

So no, not really a contract.

MuffinFlavored2• 7 years ago

replaced with a 401K funded to 25% or some such.

25% employer contribution match? That seems very high. I've never worked at a company with higher than 5% match.

xienze• 7 years ago

And six or so years ago IBM changed their 401k match to only provide the matching funds if you were still employed on December 15th instead of every pay period.

They really are the worst.

matthewaveryusa• 7 years ago

Not sure if this is legal or not, but this is definitely why I think the 401k/private saving model is the best. It's a lot easier for governments/corps to change the payout of a system they run vs. clawing money away from an account you own. That being said there should be a minimum safety net for those that don't have the diligence to save by their own accord.

Retric3• 7 years ago

Personal 401k’s don’t offer much over saving directly. It has some tax advantages at the individual level, but those tax savings are just shifting money around at the societal level.

The upside of public / private pensions is pooling money among a pool of survivors. Rather than saving X money to live off of at 95 while risking dying sooner you essentially save less on a bet that will live to be 95. Die early and you don’t care about losing that bet. Of course this means less money for people to inherit.

Sadly for individuals it’s illegal to set contracts up to do this as they create incentives to kill people which have resulted in past murders. Annuity‘s can offer some of the benefits, but are forced to make less risky investments.

golover7212• 7 years ago

Sadly companies never really have contributed much to employee 401ks which was one of the main selling points when being offered as an alternative to pensions.

Employees are very lucky if employers contribute 50% of their contributions (which would would be a max possible of $9500 match this year). And usually it’s significantly less.

In 2019 employers are allowed to contribute up to $36000. No company I have heard of provides anyway near that. The 401k has unfortunately allowed employers to care very little about employees retirement.

technofiend2• 7 years ago

but this is definitely why I think the 401k/private saving model is the best.

Not sure if it made outside just the Houston news cycle at the time but as an employee of a competitor I heard from friends at Enron that their employer froze all sales of their stock in employee 401ks before going under. Lou Pai managed to cash out as part of a divorce settlement as documented here https://www.chron.com/business/enron/article/Ex-Enron-exec-P... but most employees were not able to divest themselves and protect their retirement.

undersuit• 7 years ago

Highly compensated employees in Amazon can't contribute the total yearly amount to their 401ks.

In the simplest terms, contributions made by HCE’s can’t be excessive when compared to those of non-HCE’s. For example, if the average plan contribution by non-HCE’s is 4%, then the most an HCE can contribute is 6%.

Not that I hear much complaining about the compensation, they're rolling in after-tax dollars and RSUs.

JOnAgain• 7 years ago

People currently accumulating benefits will stop accumulating. It’s a pay cut.

Plan was closed in 2012, so these are longtime employees.

People currently collecting pensions are not affected.

Ex employees in the pension are being cashed out with lump sums.

Source: https://www.wsj.com/articles/erie-hit-rock-bottom-the-former...

citilife• 7 years ago

There's typically a minimum limit set out by a set of laws. So if you have $100k yearly pension, they may have to pay at least $25k.

Reality is, 401k is much better for all parties as company and employee can part ways at any time. Employee has more control over their funds, but risk they will lose it all (not companies problem).

twodave• 7 years ago

Do pension funds rely on a growing population in order to sustain themselves? I wonder whether they'll see a resurgence as the baby boomers die off and the age distribution in the U.S. becomes more uniform, or if these sorts of plans are a thing of the past.

anonuser1234563• 7 years ago

In the corporate world, probably not. Pensions obligations just look like debt on the balance sheet... but they have high administrative overhead. Further, there is the risk that life expectancy will continue to grow... thus making those liabilities much larger.

In government... I don't think pensions ever went out of fashion. Why bother when you can always just print more money?

voxic11• 7 years ago

Not all governments can just print more money, which is why many state and local pension programs are in major trouble.

hiram112• 7 years ago

In government... I don't think pensions ever went out of fashion.

There are a lot of different pension schemes out there as the feds, states, and localities do not use uniform plans. What I've seen, though, is that there are now "two tiers" - one for older employees and another for younger ones. You can guess which plan is more generous...

A lot of localities and states see the writing on the wall - that their perpetual 9% growth rates and population increases won't keep up, and are thus moving new employees into 401K plans, no different than the rest of us in the private sector.

Honestly, I don't think I'd be able to tolerate being a teacher or state employee, and knowing that my manager, 20 years older than me, has a retirement worth 3x as much, and it will be funded by increasingly shorting me on salary and benefits (along with tax increases) as the pension liabilities become harder to pay. Look at certain cities like Chicago and Baltimore and states like New Jersey for a current example.

bryanlarsen2• 7 years ago

Pension funds (and retirement savings in general) depend on low-risk investments returning significantly above inflation. These no longer exist, for a variety of reasons, demographics being one of many.

People have been assuming that negative interest rates are a temporary thing but people are beginning to think that this may actually be the natural state of affairs.

Historically, protecting your wealth cost real money: banks had to hire guards to protect the gold in their vault. Fractional reserve banking flipped this so that the banks started paying interest.

But now the world is awash in capital so low risk investments now return interest less than the inflation rate. Even the nominal rate is now sometimes below 0. (https://news.ycombinator.com/item?id=20696343)

There is no longer such a thing as a "safe investment". The only way to grow your money is to take risks with it, and the level of risk required to get returns significantly above inflation is growing.

zaphod4203• 7 years ago

This is good for Bitcoin.

bjourne2• 7 years ago

Piketty would claim that wealth accumulation has reached a maxima. Return on investment is, after all, wealth being concentrated into fewer and fewer richer and richer individuals. If wealth can't be concentrated further then return on investment can't happen either. We might have reached such a state in which the rich, relatively speaking, can't get richer and the masses of poor, relatively speaking, can't get poorer. You can't squeeze water out of a stone.

mywittyname3• 7 years ago

Growing populations help mask the underlying issues with pensions, which are mainly, 1) they are almost always underfunded, and 2) they have unrealistic expectations for growth.

I doubt we will every see pensions come back because they become less appealing the more realistic they have to be. Of course pensions sound awesome if you're a firefighter that receives $97,000 a year for life after 25 years of service. Such a person may have received only $1.7MM in total compensation over 25 years, yet, because of how public pensions are calculated (and a bit of graft), they earn an income that would take investments worth $2.4MM to maintain. This is not including health insurance, which is likely another significant amount.

When I take the same firefighter's wages over the years, and calculate the return of a 12% of earnings contribution annually, and a 12% annual return on investments, that same person has only contributed a little over $1MM.

Meaning their sustainable pension withdraw is roughly $41,000/yr.

\* I made these numbers up in an excel spreadsheet, assuming they made $38k in 95 with a 3% raise each year, and a 10% promotion raise every 10 years, along with the typical inflated wages in the last 3 years to maximize pension benefits. So they ended making $107k/yr.

Edit: After some playing around, I've determined that pension contributions would need to be roughly 30% of wages in order to be properly funded with a 12% annual return. Using S&P500 rates of return, contributions need to be closer to 50% of wages.

rmah• 7 years ago

Most public (i.e. government) "pension funds" are not pension funds, they are welfare benefits programs for retired people. That is, they are not primarily funded through individual savings or investments but through current taxes. The US Social Security system, for example, works this way. While excesses are "invested" in US government treasuries, this is really just a delayed tax obligation. And while the SSA may provide you with a report about your "account" -- complete with contributions, balances and anticipated payouts -- it's mostly meaningless as your benefits are not contractually tied to past contributions. They are instead only related by regulation, but those regulations can be changed at any time.

The article is about GE's pension fund, which is separate and distinct from the US government "pension fund" (the social security system). It is also not a 401(k) or similar fund, those are tied to individuals and managed by a third party. Many larger and more established companies and organizations in the US have pension funds similar to GE. They are typically defined benefit funds, as opposed to defined contribution funds. Defined benefit means that the amount of the pension is defined up front and does not depend on investment returns during the lifetime of contributions. This obviously creates problems if returns are not as good as projected and provides a temptation for companies to put less into the fund, hoping that future company growth will make up the difference. Many companies have succumbed to this temptation, GE among them it seems.

Without even looking at the details of the GE plan, I strongly suspect there will be multiple lawsuits over this action. On the other hand, it's a bit surprising that GE could unilaterally take this action without the buy-in from various unions, so maybe they pre-negotiated it ahead of time.

AdrianB1• 7 years ago

In Europe, yes. In US, there are some good answers here.

mschuster913• 7 years ago

... and this is why pension schemes should be managed by the government or at least tightly regulated.

Just imagine GE going bankrupt - who's gonna pay the pension, then? The government in a bailout or what?

sesuximo• 7 years ago

At least in the US, what you describe is reality. Pensions are regulated heavily (you may disagree with the few legal flexibilities though).

And they are at least partially insured:

https://www.pbgc.gov/

Maybe the PBGC will go under? Who knows.

lotsofpulp26• 7 years ago

Non taxpayer funded defined benefit pensions are regulated.

Taxpayer funded defined benefit pensions have zero regulation. Because they have the power to tax.

And there is a bill currently worming it's way through congress to bailout PBGC (although they don't say it directly):

https://www.govtrack.us/congress/bills/116/hr397

https://burypensions.wordpress.com/2019/01/09/butch-lewis-ac...

helpPeople• 7 years ago

Do people not understand this is how pensions work.

If your company isn't there when you retire, you don't get a pension.

I find it incredibly risky to rely on pensions. I don't quite understand why employees are so excited about non cash benefits.

lotsofpulp26• 7 years ago

I don't quite understand why employees are so excited about non cash benefits.

They might not be aware that automation has done away with the role of pension fund managers. In the old days, you couldn't just go out and buy a total stock market or bond market ETF. Nowadays, you don't even have to think about asset allocation with target date funds. And since all investments are going towards the fewer and fewer remaining companies, a bailout for one is a bailout for all.

phonebanshee• 7 years ago

Why do you think that?

httpss://en.m.wikipedia.org/wiki/Pension_Benefit_Guaranty_Corporation

mschuster913• 7 years ago

In Germany, the pension (Rentenversicherung) follows you during your employment life, the mandatory contributions are automatically paid by your employer and it does not matter if the employer goes belly-up at some time between now and your eventual death.

The idea that someone could lose their retirement and depend on social security or nothing at all simply because the company one has dedicated his life to goes bankrupt is just... horrible.

ceejayoz• 7 years ago

If your company isn't there when you retire, you don't get a pension.

https://en.wikipedia.org/wiki/Pension_Benefit_Guaranty_Corpo...

walshemj9• 7 years ago

The pension is separate to the company is it not, or is the US more lax.

In the UK pensions are independent of the company due mostly to some scandals in the past Robert Maxwell for example.

ghaff6• 7 years ago

Leaving aside government guarantees or other forms of pension insurance that may or may not be effective...

If your company isn't there when you retire, you don't get a pension.

It depends. My pension has gone through a couple of different acquisitions but it still exists.

RIMR3• 7 years ago

Employees are excited about non-cash benefits because they were told by their employers that they are worth getting excited about.

Employers are excited about non-cash benefits because it cuts risk by reducing their overall obligation to their employees.

mkohlmyr• 7 years ago

Just wait until your own trusty government is running low on funds...

Ultimately however you have to trust some third party - to some degree - not to waste or misuse your money.

wyldfire• 7 years ago

In a bankruptcy proceeding, the courts try to balance the needs of retirement benefits along with the company's creditors. GE has enormous assets so it's not a safe assumption that the pension obligation just disappears in a bankruptcy.

dfischer2• 7 years ago

More signs of debt crisis and global liquidity risk. Now wait until California capitulates...

dfischer2• 7 years ago

Lol downvoted? Why?

anonuser1234563• 7 years ago

Most (if not all) pensions do not contractually guarantee future contributions or cost of living adjustments. You can't claw back existing obligations, or promised future obligations.

Pension systems are just a big scam on everyone.

Clubber2• 7 years ago

I inherited the desire to buy American cars to support America workers from my Uncle would was a WWII vet. He didn't like Japanese products (he was in the Pacific theatre). I've been buying American cars for the last 20+ years and currently own a GM. I think the next one I buy will be Japanese or German and it's ironic. While I spent my money on American cars to support American workers, the American companies offshore their manufacturing / assembly to Mexico while foreign companies who sell cars in the US use domestic labor for manufacture / assembly.

So it seems like if you want to support American workers, you should buy foreign cars that manufacture / assemble in the US. That's certainly unintuitive.

rootusrootus• 7 years ago

Are you conflating GM with GE?

entropea2• 7 years ago

I read it that way too, at first, mostly because of GM's recent strike & health benefit cut headlines.

Clubber2• 7 years ago

Yes. I guess it's because GM is in the news too.

eternalny13• 7 years ago

Keep in mind this comes on the heels of the Madoff whistleblower saying GE is a fraud:

https://www.barrons.com/articles/ge-insurance-fraud-madoff-w...

They piled up massive losses in their insurance division (long term care) and guess who gets slammed because of it?

The workers.

lotsofpulp26• 7 years ago

I doubt it, defined benefit pension plans don't make financial sense in the current climate. Who is able to predict which company will be around in 30 to 60 years in the future, and what the economic climate will be?

And much of the pension fund investments are going to the same place as 401k money anyway. Why not directly invest in VTI and skip paying all the pension fund managers and staff? It's not like they have some secret investment return recipe, and it shows in their performance.

chrisseaton3• 7 years ago

I wouldn’t even agree to getting a defined benefit pension these days - why wouldn’t you want to invest your own money instead of letting one company you happened to work for control your pension?

I have a defined benefit pension from a previous employer and frankly I count it as zero in my financial planning since I have no idea if it’s actually coming or not.

rileymat22• 7 years ago

The simple answer is that group mortality is easier to estimate and plan for than individual mortality.

At 65, you do not know if you are going to live to 70 or 101, so you need to plan your 401k accordingly, pessimistic.

Couple that with the fact that many many americans could not save enough to last to 101, but could last until 72. So they are left with the choice of living more poorly than they should or running out of money.

Defined benefit makes way more sense, some people "win" by living longer, others lose. But there is much less stress in the meantime.

walshemj9• 7 years ago

1 DB schemes are much better for the employee than DC

2 Pensions funds are different to investing for individuals (with small portfolios)

DB schemes have very long lifetimes and have to invest for multiple generations and cant just invest in a tracker - they have to have a suitable investments in bonds and guilts for example./

froindt3• 7 years ago

I agree. It was interesting to see this all come up with union negotiations. The union's push against switching to a 401k was that it puts them at risk when the market performs poorly. Unfortunately from a company standpoint, when the market goes down, their required pension contributions go up, a real bind in cash when you need it most.

There's more politics involved - like the automotive unions giving up numerous raises for better pensions, companies refusing to fully fund pensions in good years leading to them being woefully underfunded in bad, etc.

Personally I'm glad to not have a pension hanging over my head. I could leave tomorrow and have the full value of my 401k. I know people who are miserable and hate their jobs, but if they leave before hitting 30 years, they get barely anything. At my company, leaving at 29 years would yield less than half the monthly payout compared to 30 years. The pension and social security is the retirement plan for those who live paycheck to paycheck.

I do really wish everyone had the same access to tax advantaged accounts. The administration costs of 401k's make it more challenging for small companies to offer. All else equal, having a 401k available versus unavailable is with a few thousand dollars per year to me because of the tax deferral.

lightedman• 7 years ago

GE is probably a bit more than fraud given my experience with some of their LED products. I'd say they're outright liars.

The UV Blacklight they advertise at 7W - you think that's getting 7W of UVLED. Nope, instead you get a single 1W UV LED surrounded by 4 1.5W LEDs. And you pay almost $20 for this rip-off of false advertising.

Traster• 7 years ago

It's worth noting here, that nothing in this new news indicates any sort of fraud, merely that GE is struggling - as everyone already knew.

rayiner2• 7 years ago

Yes, GE lost a bunch of money in purpose so it could screw over workers.

throwaway926• 7 years ago

Usually companies cut compensation as a last resort, as it's damaging to morale. They don't do it for fun. Some people are obsessed to see employment relations as a zero sum game.

seren• 7 years ago

For what it is worth, the website that was launched alongside the fraud allegations has already been removed.

http://web.archive.org/web/20190929121126/https://www.gefrau...

So basically, there was some media orchestration, GE stock dipped somewhat, potentially the hedge fund paying Markopolos made some benefits and there was not really any follow up (so far) from the SEC. And the website disappeared a month later.

I felt that the reactions from analysts were that most long term care insurances are problematic, GE possibly a bit more but not spectacularly worse than competition, and that the "fraud" part was a bit overblown.

We'll see if the SEC will open an investigation, but so far not a lot happened.

Still even without being a fraud, this might be an issue in the years to come for GE to be able to generate enough cash to pay for its long term care business...

guardiangod• 7 years ago

the website that was launched alongside the fraud allegations has already been removed.

Maybe the SEC is starting the case and asked the tipsters to remove all relevant documents online to prevent prejury?

sailfast• 7 years ago

For what it's worth, shareholders are also getting slammed, but they can always sell to get away. Not always an option for folks that are employed at the organization.

harryh• 7 years ago

It's not just the workers, GE shareholders have gotten slammed as well. GE's stock is down about 70% in the last 3 years.

This is what happens when a business underperforms.

rlonstein• 7 years ago

Appropriate... https://www.youtube.com/watch?v=zOXtWxhlsUg

joeyrideout2• 7 years ago

An important distinction to make with GE is that most of their pension plan is "defined benefit" as opposed to "defined contribution". The latter is much more common nowadays because it avoids these massive long-term obligations to the company.

EDIT: Added "most of". A percentage of their employee base has already transitioned to defined contribution.

lotsofpulp26• 7 years ago

In the US, "pension" typically means a defined benefit pension.

joeyrideout2• 7 years ago

Not any more... "The percentage of workers in the private sector whose only retirement account is a defined benefit pension plan is now 4%, down from 60% in the early 1980s. About 14% of companies offer a combination of both types." [1]

[1] https://money.cnn.com/retirement/guide/pensions_basics.money...

chrisfinazzo• 7 years ago

In the past, this was generally true, but not anymore. Case in point, my great uncle - yes, that's a thing in genealogy, look it up - was fortunate enough to retire with one in the late 80's/early 90's.

You don't even have to know much about the system to understand how this works.

Defined benefit - Your pension is X, determined by rank, years of service, etc.

Defined contribution - While the above conditions may still apply, the bottom line of how well you do is determined by how much you put in on a regular basis.

Not hard to imagine why most companies made the switch or simply stopped offering traditional pensions - they're really expensive over the long term.

charles_f• 7 years ago

Earnest question from a non-American - aren't companies legally bound to pay these benefits?

It's always surprising to me to see those huge companies stopping payments and the story ending there

hammock2• 7 years ago

"Defined contribution" is a euphemism to give a softer landing for employees that were expecting a pension. Workers should consider not using that language. The fact is the words are 50% the same but the product is 100% different.

sokoloff6• 7 years ago

I think it's a quite literal and clear explanation of the differences between the types of plans.

Which variable is fixed?

In a defined contribution plan, the contributions are fixed/defined and the benefits vary.

In a defined benefit plan, the benefits are defined/fixed and the contributions vary.

beached_whale• 7 years ago

It seems that when the companies do not own the pensions and they are funded properly this issue goes away. It's when the companies play games with other peoples money that we have victims. Independent 3rd party management of pensions often means less shenanigans and trouble

kpmcc• 7 years ago

And while they cut pension benefits, this is what the CEO makes:

https://www.cnbc.com/2018/10/05/new-ge-ceo-larry-culp-inks-s...

spo81rty• 7 years ago

It says his compensation is largely tied to company stock performance. He is not guaranteed all of that money. He and the company have to perform.

eternalny13• 7 years ago

And shares rose on the news of the pension cuts.

It's not hard to play this game, if your incentive is to make the stock price go up.

Slash and burn.

rwmj2• 7 years ago

Stock is up 3% on this news, and no doubt will be up on future news of cuts to headcount, benefits, etc. So there's a conflict of interest here.

fencepost• 7 years ago

You know how you raise the stock price when you're a CEO? You get a tax cut from 35% down to 21% with the nominal purpose being so your company can hire more workers (to handle the business that was previously not profitable enough to cover their wages?), then you use that money for stock buybacks.

Less supply of your stock plus a deep pocketed purchaser? It's bonus time!

rayiner2• 7 years ago

A rounding error compared to the billions owed to pensioners.

Phillips126• 7 years ago

Was just about to link the same article. It's sickening how much these CEO's make.

For those who want the stats from the SEC[0]:

  (1) a base salary of $2,500,000 per year.

  (2) a target annual bonus opportunity at 150% of base salary ($3,750,000).

  (3) annual equity awards in the form of performance share units (“PSUs”) 
      that will have grant date fair values of $15,000,000, beginning in 2019.

  (4) a one-time inducement award of PSUs that will pay out [...] as a number of 
      GE shares ranging from 2.5 million to 7.5 million shares, based on a GE stock 
      price appreciation target ranging from 50% to 150% using the highest average 
      closing price over 30 consecutive trading days during the four-year period from 
      October 1, 2018 to September 30, 2022, with no payout for stock price appreciation 
      of less than 50% (This could net him $47,000,000 - $233,000,000!).

  (5) cash severance in an amount equal to two times the sum of Mr. Culp’s base salary 
      and target annual bonus opportunity, in the event that his employment is terminated 
      by the Company without cause or by Mr. Culp for good reason.

[0] https://www.sec.gov/Archives/edgar/data/40545/00000405451800...

Miner49er• 7 years ago

What's even worse is how much dividends they've paid out to shareholders. $394 million this year and $3.23 billion last year, if my math is right. Before that they paid out $4 billion a year, but they reduced it in December, 2018.

Spivak2• 7 years ago

Okay look, I get that it’s fun to be angry the high salaries of CEOs but it’s one of those things that just doesn’t matter and does nothing but distract from the actual problems. That 2.5 million dollars distributed to the 20k pensioners amounts to $125/person/year. If you distribute it to all $300k GE employees they get a $6/yr raise.

Someone12343• 7 years ago

That $2.5M isn't even half of their compensation. Why did you pick the lowest figure in the article to make this argument?

entropea2• 7 years ago

Didn't they just get a massive tax cut?

zarro5• 7 years ago

I really think that the sooner we can separate out pensions and healthcare from employers, the better.

Businesses main area of expertise is not in pensions and healthcare, and they cannot provide these services as efficiently as if there were many different insurance companies on the market offering these services for sale, and instead the company paid you a fee for your services, and then you went out on the market and bought your own pension plan and health insurance.

orian• 7 years ago

You mean like in good, old Europe? No way!

geogra4• 7 years ago

Well, the european model sees these as natural monopolies and just provides them at the state level

zarro5• 7 years ago

I'm not sure that the European version of outsourcing that responsibility to the government is the way to go for the same reason.

Letting people set up private companies with competitive options I think would probably drive the best results.

dang• 7 years ago

Please don't post unsubstantive comments or foment regional flamewar here.

https://news.ycombinator.com/newsguidelines.html

chooseaname2• 7 years ago

I would love for this to happen. But I see a couple blockers.

1) It is some sort of badge of honor to get a "job with benefits".

2) What if more people decide to not get healthcare? If your job gives it to you and you "only" have to pay a few hundred a month for your family, you are more likely to get it than if you payed everything out of pocket each month (even if your compensation increased). People would see all the extra money and just not get healthcare. If enough people did this, healthcare would be too expensive for the rest of us.

3) People are just reluctant to big change. And this is a big change. There would be politicians on the news claiming someone was "taking away your benefits".

admiun• 7 years ago

Regarding 2), you could just make healthcare insurance mandatory. We have that in The Netherlands.

lotsofpulp26• 7 years ago

2) What if more people decide to not get healthcare? If your job gives it to you and you "only" have to pay a few hundred a month for your family, you are more likely to get it than if you payed everything out of pocket each month (even if your compensation increased). People would see all the extra money and just not get healthcare. If enough people did this, healthcare would be too expensive for the rest of us.

ACA had a solution to this, it was an extra tax for not purchasing health insurance. Because health insurance premiums are basically a tax to provide healthcare to everyone. Because US voters don't want to directly pay the government to provide healthcare to everyone.

hocuspocus4• 7 years ago

1) Employers could still cover the premium as a benefit. You'd just get to choose how and where to use the money.

2) Make it truly mandatory like in all developed countries.

at-fates-hands• 7 years ago

> What if more people decide to not get healthcare?

This is exactly what happened under the ACA. This is also the main reason many major health care companies like Aetna and UHG dropped out of the exchanges:

Insurers need young people to, in a basic sense, pay into the system, since they tend to be healthier and use fewer healthcare services — thus partially subsidizing the older and less healthy people that cost more to cover than they pay in.

Since the rollout of the exchanges, the number of young, healthy people signing up has not been enough to offset the sicker population, leading to millions of dollars in losses for many insurers.

https://www.businessinsider.com/millennial-uninsured-rate-ob...

ScottFree3• 7 years ago

I have yet to meet a single person who hasn't enthusiastically agreed that we should separate healthcare from employment. The reluctance comes when nobody has any idea what we're going to replace it with.

We're at an unusual social state in this country where nobody trusts the government and nobody trusts big business. What does that leave?

I'm a US freelancer, so I don't get health insurance through my employer. I get most of my healthcare directly from doctors and pay for visits and lab tests in cash. It works especially well when you tell them in advance you'll be paying with cash and haggle a price before walking through the door. I pay for a high deductible plan through a christian co-op for unforeseen events. This has proven to be considerably cheaper and more effective than paying for a plan through the obamacare marketplace.

zarro5• 7 years ago

Contrarian argument regarding point 2:

I find it weird and misguided how people think that using coercion to force people into buying healthcare is somehow acceptable. To those that think it will make the cost of healthcare more expensive for the rest of us, I think that is a dubious assertion, in fact I think it will get much cheaper. The presumption that they are in contentious debate with is the necessity that different people have to get different tiers of service based on how much they pay.

It makes all the sense in the world when you compare it to any other business. You wouldn't expect for someone who paid $1M to get the same level of treatment as someone who paid $100.

People would buy insurance according to different tier levels of quality and risk profile, with their being astronomically high costs of insurance for old wealthy rich people, who in their desire to prolong life will incentivize creation of new modes of treatment to cure themselves (Which in the short run the development of which will help them, but in the long run, everyone, as after it gets discovered and scaled it will get cheaper).

People would also buy cheaper level of tiers, from which naturally the quality of treatment, and queues will get lower/longer.

You will also have people that don't buy insurance, and this should be their prerogative to do, as it would be the healthcare providers prerogative to decide whether to provide them with free treatment (they are not slaves, they are not obligated to provide a free service, and what makes the people that don't pay more important or a higher priority than those that willingly pay and fund these services).

I'm not saying that this is the BEST solution, I'm saying that this is BETTER than anything else proposed which leads to things like the "cobra effect" in which you make the initial problem way worse by the implemented solution, than by what it would have been without it.

seanmcdirmid9• 7 years ago

Europe has mostly already figured out all of these things. Jobs can still provide some benefits like accident insurance and transit cards, but healthcare and pensions are heavily regulated by the state apart from who you are working for.

Your points are American only and stem from a bunch of perverse decisions made during the wage controls of WW2.

antisthenes• 7 years ago

1. Maybe I just haven't had a job with good benefits, but for me, the biggest and the only benefit I care about is the amount of PTO.

Other countries seem to be doing fine with that model, I'm not sure what it is about the US culture that prevents it from working.

2. Single payer.

3. This statement always seems like a cop-out to throw hands up in the air and do nothing. There are things you can achieve with a multitude of small steps. There are things where you can't, and you have to take a few large leaps.

To just say oh let's ignore the latter category forever, because people people don't like it, is simply giving up.

akvadrako• 7 years ago

That's easy and libertarian to do — just stop government from treating benefits as a special case in terms of taxation. It feels like a policy that should have cross party support among those who want smaller government or better social systems.

Bartweiss3• 7 years ago

It's frustrating that employer-provided healthcare is treated as the standard alternative to single-payer, with very limited time spent on why even private insurance is specifically coming from employers. (When historically, as you point out, the answer is "tax reasons".)

The current system drives all kinds of awful distortions independent of actual cost, and it wouldn't take much to improve. Swapping the tax exemption for a write-off would be a significant start to stop penalizing freelancers and part-time workers who have to buy their own insurance, and indirectly promote competitive not-employer-sponsored plans.

I'm not sure if this just gets ignored because the issue is so contentious that small changes aren't worth the political price, or if there's something darker there, but it sure seems like it could be a bipartisan move.

nguoi4• 7 years ago

It also incentivises propping up old, failing companies at the expense of the newer, innovative ones that would replace them in a healthy economy. For the same effect, get everyone to invest their entire private pension into their final employer.

ajnin• 7 years ago

It's not that they can't, more that they don't want to, because that gives them leverage on their employees. Look at the recent GM strike : not happy ? We're cutting your health insurance. They reversed it ultimately but I bet it'll make people think twice next time they're thinking about going on a strike.

And you know what is even more efficient than market-based health insurance and pensions ? Socialist state-level monopolies. Yep, costs in Europe are about half of what they are in the US. Turns out governments are not more inefficient than companies, especially very large ones.

stephen_g• 7 years ago

We have basically 'Medicare for all' in Australia. Works well. We spend way less as a proportion of GDP than the US on healthcare and the hospitals in the big cities (where they send people for anything serious) are world class.

Most things like GPs, physiotherapists, etc. are private but the Medicare system pays for something like 60% to 100% of the bill depending on various factors. You won't usually pay more than $30 for a standard GP consult, for example.

Crazily, the private insurers (it's optional) are trying to push for tax breaks to employers if they pay for private health insurance for their employees (more like the US system but basically unheard of here), despite the fact that the private system is already heavily subsidised (big rebate on private health insurance and also tax benefits for moderate and high income earners), and despite the fact that our public system is more efficient (according to studies), so we'd actually be better off just investing that cash in the public system (because of underfunding there are waiting lists for a lot of elective surgery).

But the private insurance industry is generally struggling because they've been raising premiums and reducing service (more exclusions and bigger excesses) and our public system is good.

La-ang• 7 years ago

Lol. I remember Chomsky saying GE is not about manufacturing much as it ought to be, but rather about moving money in very complicated ways.Who foresees its collapse in the next 5 years?

GE freezes pension benefits for 20k employees

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