Congress Looks to Business to Pay for Social Programs

With no room in the federal budget for expanded social programs, members of Congress are looking hard at a different source of revenue--business--to pay the price of their legislative ambitions for better health care and job security and safety.

American companies could be forced to spend upward of $40 billion a year if Congress enacts pending proposals for mandatory health insurance for all workers, 60-day notice of layoffs and plant closings and guaranteed unpaid leave for new parents.

“This is a pretty dramatic development,” said Jerry Jasinowski, chief economist of the National Assn. of Manufacturers. “It’s a new way to spend money on social programs and charge the companies rather than the U.S. Treasury.”

Business is fighting back with a major lobbying effort. For the first time in its history, the National Federation of Independent Business, which mostly represents small firms, sent a mission to the Democratic National Convention last week, and it will do the same next month when Republicans gather in New Orleans.

“Companies from small to large are responding quite vigorously with letters and phone calls and contacts to Congress,” said Virginia Lamp Thomas, manager of employee relations for the U.S. Chamber of Commerce. “But we’re not sure if it will be enough to stem the tide.”

The idea of imposing the cost of new benefits on business has special appeal for liberal Democrats who have become trapped in the straitjacket of massive federal deficits.

Rep. Leon E. Panetta (D-Monterey), who is expected to become chairman of the House Budget Committee next year, delivers a sober message. “With deficits approaching $200 billion a year,” he said, “one clear principle must be this: If the tax burden on Americans is increased, Congress must first ask whether those revenues should be used to reduce the federal budget deficit.”

If direct tax money is in short supply, Democrats find business to be a natural place to turn.

“We’ll never have national health insurance,” said Rep. Pete Stark (D-Oakland), chairman of the House Ways and Means subcommittee on health. “What we have to do is chip away at things, piece by piece.”

Equivalent to Medicare

Stark has introduced a bill requiring business to provide health insurance coverage for all employees who work at least 17 1/2 hours a week, as well as their dependents. The mandated coverage would be equivalent to that offered by Medicare: full reimbursement for hospital costs after the patient paid $580 for the first day, and 80% reimbursement for doctor bills, with the patient’s share not to exceed $1,370 a year.

Stark estimates that 23 million workers and family members are not now covered by health insurance.

A competing bill, sponsored by Sen. Edward M. Kennedy (D-Mass.) and Rep. Henry A. Waxman (D-Los Angeles), would require coverage of 80% of most medical costs, with family expenses limited to $3,000 a year. Like Stark’s, the Kennedy-Waxman bill would cover everyone who works at least 17 1/2 hours a week.

The Kennedy-Waxman bill has already been approved by the Labor and Human Resources Committee, which estimates that it would cost business $27 billion a year. Robert Damuth of Robert R. Nathan Associates, a Washington economic consulting firm, studied the potential costs for a business foundation and came up with an estimate of up to $39 billion.

Prospects Could Brighten

There is not enough time for Congress to complete work this year on this controversial measure, but its prospects will become much brighter next year if Democratic nominee Michael S. Dukakis is elected President.

As governor of Massachusetts, Dukakis pushed a bill through the Legislature this year that imposes a special tax on businesses that do not spend approximately $1,680 per worker for health insurance. He plans to emphasize the issue in his presidential campaign.

“If Dukakis wins, there is a very good chance we will get something like the Senate bill,” said Bert Seidman, director of health and safety for the AFL-CIO. “If he doesn’t win, it’s still by no means out of the question.”

Seidman said the legislation would fill a gap left by the growing number of workers who do not belong to unions and cannot gain fringe benefits such as health insurance through collective bargaining.

For the most part, larger companies and firms with union contracts already provide health insurance for their workers. The legislation would have its biggest impact in the retailing and service sectors and among smaller manufacturing companies.

‘A Matter of Luck’

“Having health insurance coverage now is to some extent a matter of luck,” Waxman said. “If you’re fortunate enough to work for one manufacturing firm or retailer, you have good health insurance coverage. But if you work just as hard and have just as many responsibilities but happen to work for a different company, you have no insurance.”

The problem is particularly acute in California. Nationwide, only 17.6% of non-elderly adults, including the unemployed, are not covered by health insurance, according to the UCLA School of Public Health. But the rates are 26.7% in the Los Angeles-Long Beach area and 26.2% in the San Diego area--the highest levels among the nation’s 20 largest metropolitan areas.

A few major businesses, including American Airlines, Chrysler Corp. and Baxter Travenol Laboratories, have broken ranks to support mandatory health insurance coverage.

“Companies like ours pay for health care twice--once for our own employees and then again, via taxes and inflated health insurance premiums, for the employees of those businesses who don’t provide benefits for their own people,” said Robert L. Crandall, chairman of American Airlines.

But most companies, Jasinowski said, consider government-ordered health insurance “as the principal legislative threat to keeping their costs down in order to be competitive. It’s rare that I talk to firms where they don’t raise this issue.”

Expresses Disappointment

Small businesses in particular object to government-mandated health insurance. “I’m disappointed with Chrysler and American Airlines,” said John Sloan, president of the 500,000-member National Federation of Independent Business, “but I’m pleased to say that our friends at the U.S. Chamber (of Commerce) and other groups representing big business have stood by us.”

Sloan said health insurance could impose heavy costs, especially on firms with relatively low-paid employees. “We don’t see it as the role of government to interfere in the marketplace this way,” he said.

Family insurance premiums for a worker and dependents could run as high as $3,000 a year, Sloan says, although Kennedy’s staff insists that the price could be as low as $1,868 a year.

Although insurance companies would sell more policies if the government ordered universal coverage, the insurance industry opposes the bill. “The word ‘mandated’ makes the hair of insurance executives stand on end,” said a spokesman for the Health Insurance Assn. of America. “They don’t like the idea of increased government regulation, even if it means more business.”

David Nexon, health policy director on Kennedy’s staff, said he was astounded by the insurance industry’s position. “If we had a bill saying every American family should buy an American car, GM would be behind it,” he said.

Issue Stands Out

Health insurance is the most expensive and politically charged of the proposed mandatory employee benefits being pursued in Congress. But it is just one of several provisions raising the hackles of business.

The total price tag for health insurance and two other proposed mandated benefits would range between $34 billion and $42 billion a year, according to Damuth’s study. And a fourth program, which would have required companies to pay for medical examinations and any needed treatment for former workers who had been exposed on the job to toxic materials, would have added another $6 billion to the price tag, but it has been killed in Congress.

“The key thing here is the call for major changes in the way the federal government deals with the relations between employers and employees in the area of non-wage benefits,” Damuth said. In the past, he said, the government stayed out of the way, but now some members of Congress are “telling the employers how they want employees treated.”

One proposal seems virtually certain to become law this year. Legislation requiring companies with more than 100 workers to give employees 60 days’ notice of plant closings or major layoffs has passed both the House and the Senate, by margins that would be big enough to override President Reagan’s expected veto.

Under the bill, companies that provided less than the full 60-day notice would have to pay wages and benefits for the rest of the 60-day period to the workers who lost their jobs. The added cost to business would be $1 billion to $2 billion a year, Damuth said.

Benefits During Leaves

Another set of proposals, designed to assure new parents that they could take unpaid leaves of absence, would require companies to continue providing health insurance benefits and to guarantee new parents that they would have jobs to return to when their leaves ended. The Reagan Administration is threatening to veto any such bill.

Despite the veto threat, the Senate Labor Committee last month approved a bill requiring companies with more than 20 workers to give new mothers and fathers up to 10 weeks of unpaid leave at the time of childbirth or adoption. The bill would also guarantee employees up to 13 weeks of unpaid sick leave.

The House Education and Labor Committee has approved a similar bill, but it applies to firms with 50 or more workers. Companies would have to give 10 weeks of leave to parents of newborn children and 15 weeks to sick employees.

Cost Hard to Assess

The cost is difficult to estimate because of some major imponderables, including how many temporaries would have to be hired to replace workers taking unpaid leave. The extension of health insurance to employees on unpaid leave would cost about $150 million, Damuth estimated.

All such proposals have the corporate world on the defensive.

“If the trend in Congress continues, this could really transform the way American industry provides benefits,” warned Thomas of the U.S. Chamber of Commerce. “The more mandating you have, the less business will do voluntarily.”