Public Health Insurance Issue Splits Business : Workplace: Large firms want it, saying they’re subsidizing others’ health care. Small firms counter that they can’t afford it.
Walter Maher, Chrysler’s powerful Washington lobbyist, was telling a swarm of reporters and a battery of television cameras, “There’s no reason you can’t have a well-run publicly financed health system.”
Suddenly, a woman walked over and called out, “If you go in that direction, you create a welfare state, and you chuck out the free market.” She was Carolyn Kane, a lobbyist for the National Federation of Independent Business, whose 500,000 member companies average just 15 employees each, less than a flyspeck compared to the Gargantuan Chrysler.
The spontaneous argument in a Labor Department conference room between Maher and Kane symbolized the deep divisions in the business community over the volatile issue of health care reform.
The splintering of the business community reflects the general confusion and uncertainty among Americans on the best way to provide access to health care for everyone. The issue is particularly pressing in California, where 22% of those under 65 are uninsured, compared to 16.5% nationally, according to a UCLA study. The rate in Los Angeles County is 33%.
Business is a natural focus for the debate because most Americans have their health insurance through work. California provides an especially graphic laboratory for the issue because of its profusion of small entrepreneurial ventures, consultants and the self-employed, who are often shunned by big insurance companies.
Big insurers often “cherry-pick the healthy, and if anyone in a small group has a health problem, they will kick them out,” said Steve Gorman, president of Alternative Health Insurance Services, a Woodland Hills firm that helps small groups find coverage.
At Maxine’s Seafood Cafe in Hollywood, the premium for owner Maxine Weinman and five employers doubled from $900 a month to $1,800 because a former employee is being treated for AIDS.
“Business is terrible, and I don’t know what I’m going to do,” she said. “I’ve got to have coverage for myself and my employees,” said Weinman, 59, who suffers from asthma. “I couldn’t come up with the premium for last month,” she said.
Even if Weinman finds another firm with a lower rate, medical bills related to her asthma won’t qualify for insurance for a year or more: Many policies have a waiting period for ailments already under treatment.
Big firms “ask extensive medical questions, and they accept only the cleanest groups,” Gorman said. This means that many firms bounce from one insurer to another, taking coverage for an initially low rate, then moving elsewhere when they get hit with a huge premium increase in a year or two.
Some big insurers have informal blacklists of professions and businesses they won’t cover: “They feel lawyers will sue them, doctors will over-use medical services,” Gorman said. “Beauty salons and barber shops have a hard time because insurance companies feel there are a lot of gay people there. Actors have a rough time.”
Most major corporations, particularly those in manufacturing, already provide coverage and are increasingly irritated over what they regard as a free ride by firms without protection for their workers.
Members of the National Assn. of Manufacturers pay an extra $11 billion to doctors and hospitals because of cost-shifting “from other sectors not carrying their share,” contended Dexter Baker, NAM’s chairman. Companies with coverage are charged higher rates to compensate for the lower fees paid by Medicare--the federal program for persons over 65--and Medicaid--the federal program for the poor. And they are also helping defray losses on people who show up at emergency rooms with no insurance at all, public or private.
The coalition pushing for “play or pay”--a law demanding that firms offer coverage to all workers or else pay 7% of payroll into a new public fund for the uninsured--has enlisted an impressive roster of big business supporters, including Pacific Gas & Electric, Safeway, Time Warner, Dayton Hudson, Lockheed, International Paper, Xerox and Chrysler.
Its equally determined and vociferous opponents, small businesses, are already operating under narrow profit margins and are appalled by the prospects of a new tax and more government regulations.
“We can never accept” plans mandating coverage because there are still no effective controls on soaring medical costs, said John Paul Galles, executive director of the 65,000-member Small Business United.
Most companies without insurance would pay the tax rather than offer coverage, placing their workers in the giant new public program, he warned. “Then the government would make decisions for these workers about how much health they received and when they get it. That is contrary to the free country we are supposed to have.”
Marching alongside small firms in the fight against mandatory insurance are some big companies with relatively low wages and high worker turnover. They maintain that it would be inefficient and excessively costly to offer comprehensive health insurance. Marriott, Burger King, Kmart, Walgreen’s and Holiday Inn have enlisted in the Partnership on Health Care & Employment.
Compulsory insurance for business could wipe out 9 million jobs, many held by low-income or minority groups, according to a study prepared for the coalition. The 7% payroll tax would be just a starter, the critics contend. “Anyone who thinks taxes wouldn’t go up either has been smoking something funny or doesn’t understand the history of the United States,” said Richard Berman, the partnership’s president.
Insurance coverage varies widely, by industry and size of firm. More than 80% of manufacturing workers have health coverage, compared to 41% in retail trade and just 28% for self-employed persons, according to the Employee Benefit Research Institute.
Manufacturing is paying more than its fair share, NAM’s Dexter told a recent Senate hearing. Soaring health costs will make American goods uncompetitive with foreign products, he warned. Chrysler, for example, spends more than $700 on health insurance for every car it makes.
The auto company made a massive effort to trim its health care bills, only to see its savings erased by the inexorable inflation in the cost of doctor and hospital services. So it dispatched Maher, who had run the employee benefits department, to Washington to push for a national solution.
He insisted that mandatory coverage, combined with cost-control programs, could slow the rate of spending drastically. It’s “baloney” to say that mandatory insurance wouldn’t work, Maher said during his impromptu debate at the Labor Department. He was a heckler at a press conference where two Bush Cabinet officers denounced the “pay or play” idea.
The bigger the firm, such as Chrysler, the more likely it is to provide insurance--83% of employees at companies of 250 or more are covered. In contrast, just 36% of the workers at companies with fewer than 10 employees have insurance.
Blue Cross of California, whose 5 million customers make it the state’s biggest insurer, has an innovative program for small businesses. The company accepts all applicants regardless of industry or profession.
“We think the industry was scared of its own conversation,” said Mark Weinberg, the Blue Cross executive vice president for consumer services.
The company began a special program in 1989 to provide coverage for seemingly high-risk individuals. For every four healthy persons signed up by an agent, coverage is available for a person with a problem that might normally make coverage financially prohibitive--such as heart disease, cancer or diabetes.
A group with a high-risk person is guaranteed that its rate will never be more than 30% higher than the rate for a group of fully healthy people. When premiums increase the next year, all Blue Cross customers get the same percentage increase, with no penalty for the groups with high-risk individuals.
The 30% differential isn’t enough to cover the true cost of insuring high-risk people, but Blue Cross makes it work by spreading cost across a big pool of persons. A total of 215,000 are enrolled in the small group program, including 33,000 with serious medical problems.
The company recently lowered the healthy/high-risk ratio--it will cover one person with medical problems for every three healthy individuals enrolled.
If other firms followed, the problem of the uninsured could be solved, Weinberg said. “We have a strong belief insurers must clean up their act first. All companies should accept their share of the uninsured. We’d like to see everybody come up with some program like ours.”
