The meetings signaled an unusual era of cooperation in the country’s decades-old pursuit of comprehensive health care reform, reflecting the urgency felt across the political divide to insure all Americans and reduce health costs. For employers, this was all well and good, as long as reform didn’t weaken the system that provides 170 million Americans with health insurance through their employer.
Then the first draft of health care reform legislation appeared June 5, and the era of public bipartisanship came to a halt. A second version made public June 9 included a public plan option and an employer mandate, though both provisions lacked details. The plan, introduced by Sen. Edward Kennedy, D-Massachusetts and chairman of the Senate Health, Education, Labor and Pensions Committee, also injcluded changes to ERISA that would limit companies with fewer than 250 employees from self-insuring.
Despite consensus on the need for reform, the dust-up is a reminder of how tenuous health care legislation can be and how difficult it is to please all constituents.
“We spent a lot of time preparing for reform, gearing up, working with Congress, talking to campaigns. We went into this seeking reform that would expand access and lower health care costs,” says Neil Trautwein, vice president for employee benefits policy at the National Retail Federation. “This Kennedy draft is not what we asked for, and we are not going to apologize for opposing it. We need to go back to the drawing board.”
During the meetings of stakeholders, known as the “workhorse group” and organized by Kennedy’s staff, employers made clear that they opposed four potential provisions under discussion: the introduction of a publicly run health plan; any changes to the Employee Retirement Income Security Act, which gives employers the freedom to design one health plan for employees in various states; a requirement that employers provide health benefits; and taxing an employee’s health benefits.
The fourth proposal—taxing employee health benefits—did not appear in the Kennedy legislation, the American Health Choices Act. Sen. Max Baucus, D-Montana, whose chairmanship of the Senate Finance Committee means he must find a way to pay for health care reform estimated to cost more than $1.2 trillion over 10 years, has already proposed taxing employee benefits. Observers say they expect a Baucus bill to include a tax on benefits, though it is likely to tax only health benefits that are very generous or the benefits of employees who have high incomes.
His committee is expected to release its legislation in the coming days.
“We’re not overly difficult to work with,” says James P. Gelfand, senior manager for health policy at the U.S. Chamber of Commerce in Washington. “We want to control costs. We don’t want to burden the economy and we don’t want to create some massive public program that will take over 16 percent of the economy.”
Having seen the first draft of the legislation, employer groups are taking their concerns back to Capitol Hill.
“We have a long way to go until we see a bill that’s acceptable,” says Martin Reiser, manager for government policy at Xerox Corp. and chairman of the National Coalition on Benefits, an organization focused on preserving the employer-based health care system. “We’re not going to stop trying.”
The ERISA Industry Committee, an employer lobby representing large self-insured companies, took its pleas to the Finance Committee. A 30-page letter sent by the group to Baucus and ranking Republican Sen. Chuck Grassley on Monday, June 8, reiterated the rationales behind their concerns:
• A public plan would lead hospitals and doctors to charge private plans and employers more to make up for money-losing reimbursement rates. A study in December by actuarial firm Milliman said the effect was to increase by 10.6 percent the amount employers pay for health insurance for a family of four.
• A plan to tax benefits would lead young, healthy employees to leave employer plans for cheaper ones.
• Weakening ERISA would create an administrative nightmare for large employers.
• Requiring employers to provide coverage would weaken the original rationale for providing them as a recruitment and retention tool; conversely, an employer mandate would cause problems for employers if employees were allowed to forgo employer coverage in favor of a cheaper, public plan.
“Now we know the parameters; it’s the details that we’re still looking for,” says Gretchen Young, vice president for health policy at the ERISA Industry Committee.
Suffice to say, there is enough in the bill to upset most constituents, which means there’s a lot of room for negotiation.
Republicans, employers and insurers adamantly oppose the public plan. Though the bill as it stands includes an individual mandate that could be a boon to insurers, it also imposes important restrictions: Insurers could not deny coverage or limit annual or lifetime payments. The bill regulates how much insurers can spend on non-health care costs. Insurers would have to cover as dependents anyone up to age 25.
Republicans and some in the medical community oppose funding research that would determine which treatments are most effective for certain ailments, saying it would lead to rationing of care. Their fears are likely heightened by another provision in the Kennedy bill that would create a medical advisory council—appointed experts who would determine such things as the type of health plan individuals would have to purchase to comply with the requirement that all Americans have health insurance.
Those opposing a public plan and employer mandate will have to decide where they will concede—a word that lobbyists don’t want to hear yet.
Employers, meanwhile, are already discussing what they could live with.
The chamber’s Gelfand says his group would be willing to concede on the taxation of benefits if it helped cut overall costs. That would mean taxing benefits based on how generous they are—a position strongly opposed by unions, whose members generally pay little or nothing for comprehensive health benefits.
Some employers, including Wal-Mart, are bracing for an employer mandate and hoping the level of benefits mandated would be low enough to resemble what they already provide employees, people familiar with the company’s thinking say. The key would be retaining enough flexibility that a plan could be designed by a company based on the health of their employees.
On the tax issue, the company could live with tax increases that would hit all retailers the same—like a sin tax on alcohol, cigarettes and other unhealthy products—as opposed to increases in corporate taxes.
There are portions that employers like, though the list is short. Lobbyists for large employers say they support an individual mandate, insurance market reform, wellness and prevention requirements, and a renewed focus on primary care. They embrace health care IT and pay-for-performance reforms that would pay doctors not for the volume of care they provide, but for its quality. But as Gelfand says, these changes are not the big-ticket items.
“All of these provisions would not equal 1 percent of total cost of health care reform,” he says.
Throughout the reform process, all constituents—employers, insurers, medical providers and consumers—have said 2009 is different than past efforts as annual health care spending creeps toward 20 percent of the GDP; more than 47 million Americans cannot purchase health insurance; and small businesses drop coverage while large employers continue to shift costs to employees.
The history of health care reform also has shown that constituents have been willing to derail the process on ideological grounds even if it has meant maintaining an unsustainable status quo. The question, especially as it pertains to the hot-button issue of a publicly run health plan, is whether 2009 truly will be different.
“I find it a little puzzling that employers would be so adamantly outspoken against a public plan,” says Kate Sullivan Hare, a health care policy consultant representing large employers. “If they got everything else they wanted, would they still fall on their swords on that one? I just don’t see a lot of employers caring about that.”