Business Case for Universal Health Care

Let me start out with a case study and a hypothetical government policy: A $25 million-revenue company with around 100 employees spends $0.5M on health insurance (2% of revenue, 25% of payroll). It also spends 1.45% of payroll on the Medicare portion of FICA.

If the company drops health insurance (as many have because it’s become unaffordable for many small-/medium-size businesses), it will have 2% drop to the bottom line.

Suppose Universal Health Care (“Medicare for All”) replaces private insurance. Let’s say the cost is fully borne by the employees through higher income taxes. A business would save 26% of its payroll; that’s 26% of the cost of doing business and equivalent to nearly 40% revenue increase, depending on gross margin of 50%. Absolute net profit increase 2.5%, at least. You could go from 8% net profit to more than 10%. Your company value skyrockets.

“Whoa,” you might say, “now the burden is on the employees.” However, they won’t have to juggle which policy to put the kids on, calculate if it’s better for the spouse to be on your policy or the other employer’s. Single employees won’t have to risk being uninsured because they’re not sure if they want to pay for something they’re not likely to use (more than 90% of employees have less than $500 in claims which include annual checkups). Nor would anyone have to worry about whether they were in-network or not and possibly see their medical bills increase because “their” insurance company doesn’t have an agreement with that provider. And employers might find some productivity gains because employees aren’t postponing preventive care or early care for medical conditions.

Currently the cost/employee is over $10K on private insurance, some of which is borne by employers. And that doesn’t include the deductible of $1500 in severe or moderately big health incidents. The current spending on healthcare is just over $6000/household...and that’s without projected savings because providers don’t have to wait for late insurance/patient payments, nor cover uninsured/underinsured patients. So our employees would save $4000 on the total cost. They currently pay over $5000 in premiums on average. Add in a deductible that’s at least $1000 and any co-pays, their cost is a wash and not an increase...if they bear the whole burden.