A Wary Countdown to Health Reform Plan : Workplace: Some analysts believe coverage requirements could sour businesses on hiring temporary workers.


In just about whatever package it comes, health care reform is certain to make significant changes in the workplace.

And right now, businesses and economists are playing a guessing game: Would the Clinton Administration’s reform proposal cost millions of jobs and even companies, or would it tame the beast of health care costs and spur economic and job growth?

The Clinton plan, scheduled to be formally unveiled by the President on Wednesday, cements ties between health care insurance and employment at the same time it extends basic health care to the unemployed. It would require employers to pay at least a portion of health care costs for almost all employees.

Many small businesses say they would collapse under the burden of providing health care benefits. Labor experts worry that the proposed reform would dry up job opportunities for low-wage and seasonal workers. Big business complains that it would lose its ability to influence health care cost-cutting and become merely a check-writer. Those workers who want flexible schedules, including job-sharers and part-time, temporary and contract workers, fear that in gaining the right to health care benefits, they will lose their jobs.


Of course, the Clinton proposal has yet to go through the congressional grinder--which could spew out a blend of dozens of reform plans.

“For the time being,” said Sar Levitan, an economist and director of the Center for Social Policy Studies at George Washington University, “this is mostly speculative, and the small business groups are using a lot of scare tactics . . . I haven’t seen any persuasive evidence” that there would be wide-scale job losses in the wake of reform, he said.

Though some parts of the proposal “aren’t clear enough to be able to say what exactly will change . . . the economy always changes when you change the cost of employing people,” said Audrey Freedman, an economist and New York management consultant.

Costs of health care benefits will actually decline for some companies, some proponents of the Clinton plan contend. Without reform, President Clinton has said, all businesses and individuals will be hurt by the continually increasing cost of health care. Caps on companies’ financial obligations and federal subsidies, as spelled out in the proposal, would ease the burden on some small companies and lower-income individuals.


But, said Freedman, companies that see their payroll costs ballon might decide to lay off workers, move certain jobs out of the country, replace people with technology or switch industries all together.

In retailing, she said, businesses that now offer moderate or high levels of service might instead reduce staffing levels and become warehouse-style operations, leaving shoppers to fend for themselves.

Also, the Clinton health care proposal might drive more employers and employees into the underground or “off the books” economy, in which workers are paid in cash and employers don’t keep records. The temptation may be especially strong among households that hire domestics and child-care providers--many of whom still aren’t paying Social Security taxes and unemployment insurance for their employees.

Doris Romeo, who says she has placed thousands of workers over the years in upper-crust homes on the Westside--only a handful of which offer health care benefits--worries about the cost of health care benefits. If insurance premiums for household staff members, including nannies, are prohibitively high, she said, other agencies and households will “go back to hiring illegals and not declaring them. . . . That will hurt my business.”


Business groups say portions of the Clinton proposal are clearly aimed at discouraging use of contract and contingent workers and, perhaps unintentionally, remove incentives for businesses to provide benefits that exceed the basic health care coverage that would be offered to all Americans.

In the cost-cutting frenzy inspired by the recession, employers have been stampeding to managed-cost health plans and alternative staffing methods, replacing full-time employees and their costly benefits with workers who get little or no benefits. Those include temporary and part-time employees and contract workers, who may work only intermittently and usually are not regarded as employees.

In the past five years, the number of professionals working part-time in the U.S. labor force has risen 25% to 4.3 million, according to the Assn. of Part-Time Professionals, and that does not count the millions of clerical and unskilled workers who have been shoved into one or more part-time jobs by the slow-moving economic recovery.

“Employers have been doing as much as they can to avoid paying health benefits to people working in permanent part-time positions,” said Maria Laqueur, executive director of the part-timers’ Washington-based group.


Now, Laqueur said she is “not optimistic about the outlook for permanent part-time employees. . . . Smaller businesses and nonprofit organizations (that) have been hiring part-time employees are going to face some very tough decisions.”

In fact, contends Richard Berman, executive director of the Employment Policies Institute in Washington, the plan “is biased against part-time workers” and especially against parents who want to work fewer hours so they can spend more time with their children.

Berman, whose group represents food and beverage companies--which rely extensively on part-time employees--said the plan makes the cost of health insurance for two 20-hour-per-week employees one-third again as expensive as for one 40-hour-a-week employee, because of the way the proposal calculates an employers’ share of part-time workers’ insurance.

The proposal is less clear on how health care benefits would be provided to migrant workers and retirees--groups that figure significantly in the California economy--and to job-sharers.


Economist Freedman sees such vagaries as a major flaw in the proposal. “These grand designs can be so elegant,” she said, “but large models of economy don’t notice how much very small, even minuscule activity is going on. And it’s this activity that comprises most of the economy.”

Temporary-help agencies are nervously scrutinizing the proposal. Such agencies are considered the employers of thousands of temporary workers they send to jobs at other companies and pay state, local and federal taxes, Social Security and unemployment insurance. Under the Clinton plan, it would seem, the agencies also would be responsible for some portion of the workers’ health care insurance.

“This would put a lot of temporary help firms out of business,” said Richard E. Lewis, founder, chairman and chief executive of Los Angeles-based Accountants Overload. “And you don’t want to put (these agencies) out of business--they’re the ones giving jobs to people who don’t have any.”

Labor Finders, a Southern California company that places temporary laborers in construction and light manufacturing, advertises itself with a “We Pay Everything” motto. If it had to pay partial health care costs for the 4,000 workers that come through its doors in a year, said marketing director Ray C. Welch, it “would drastically drive up the cost of our services.”


But, Welch said, that shouldn’t be too much of an impediment--as long as his competitors all face the same costs. He expects the temporary help business to continue to grow, especially when California’s economic recovery swings into full gear.

However, at H&R; Block, the accountancy and tax-preparation chain, the issue of health care premiums for temporary workers looms enormous. The Kansas City-based company has about 800 permanent employees, and nearly 78,000 temporary workers a year, according to Nicki Gustin, an assistant vice president.

“It would require massive administration--a tremendous burden,” she said. “It’s bad enough with just our full-time employees and keeping up with (federal) paperwork. To do it with 80,000 employees would be unreal.”

Some large corporations say they will be glad to see the burden of health care costs more equitably distributed; more than half of all small businesses do not now provide health care insurance to their employees. But the requirement to provide coverage is being fiercely opposed by many small businesses that instead are leaning toward alternative plans, such as the congressional Republicans’ counterproposal, which rejects that mandate.


“The mandate is a deal killer for us. It’s non-negotiable in our minds,” said Leslie Aubin, health care policy analyst for the National Federation of Independent Businesses, a Washington-based group.

But economist Levitan of George Washington University, among others, disputes the small business community’s assessment of the proposal. Levitan said discouraging the use of contract and contingent workers “may be a big plus. This is a section of the labor force that has no attachment to an employer, no loyalty and that is not a healthy situation. It reduces productivity. The employers (using contingent workers) may be responding to immediate needs, but not to long-term needs.”