Supremes 1 Economists 0

No, this is not the score of a virtual soccer match designed to parallel the World Cup.  It’s Uwe Reinhardt’s assessment of Monday’s Supreme Court ruling in Burwell v. Hobby Lobby.

As Reinhardt puts it “These justices seem to believe that the owners of ‘closely held’ business firms buy health insurance for their employees out of the kindness of their hearts and with the owners’ money.  On that belief they accord these owners the right to impose some of their personal preferences – in this case their religious beliefs – on their employee’s health insurance.”

The literature in economics is clear on who pays for employer organized health insurance: most of the burden is borne by employees, no matter who actually “writes the check.”  Health plan coverage benefits are part of employee compensation.  In contrast with the argument made by “The Supremes,” all employers subject to competition in the goods and services they produce and sell have to compare the total compensation to labor with the value generated by such labor.

Since many employees have virtually no choice in the type of health care coverage they receive, in the United States we effectively grant “quasi parental power” to their employers.  Furthermore, such powers carry over into other aspects of employee’s personal life including retirement plan choices and wellness programs.  I find it intriguing that a Supreme Court with a strong contingent that believes in primacy of liberty accepts such restrictions on personal freedom.

The Affordable Care Act (aka ObamaCare) may right the balance as next year small businesses and their employees, in addition to the more than 8 million individuals who signed up this year through the exchanges, will leave employer paternalism for more choice and better value (especially for those who are able to take advantage of income-related Federal governmental subsidies.) Wouldn’t it be ironic if this Supreme Court decision actually underpins support for participation in the health plan exchanges and thus the ACA?