Critics contend that employers who are moving to self-funding are trying to avoid offering adequate health insurance coverage. The truth is that they are making extreme efforts to maintain health insurance coverage for their employees. The National Center for Policy Analysis estimates that as many as one in four uninsured people lack health insurance because state mandates are so costly. By avoiding the mandates, companies can continue to keep their employees covered. Not only would state taxes make health insurance more expensive for employees, but the states would be able to exercise control over plan benefits through tax incentives and penalties.
States have at least indirect control over anything they can tax.
A primary benefit of the federal law is that multistate companies can construct one health insurance policy for all employees. First, employees might complain of unfair treatment, since those in some states might have much more comprehensive coverage and a greater total compensation package than those in neighboring states. Such complaints could induce companies to increase their benefits packages to meet the requirements of the most demanding states and simultaneously reduce wages or postpone wage increases to pay for the increases. Conversely, companies might cancel their policies, raise employee wages and avoid future problems. Such compromises are just attempts to accommodate large companies while forcing compliance on smaller, less powerful firms.