Mitchell’s Health Care Bill to Pare Employer Mandate

With White House backing, Senate Majority Leader George J. Mitchell on Monday prepared to unveil his long-awaited health care reform plan, focusing the debate on an element that advocates believe could win crucial moderate support for universal coverage.

That ingredient is a requirement that large employers pay half of a worker’s insurance premiums--instead of the 80% sought by a parallel bill introduced last week by the Democratic leadership in the House.

The big question is whether Mitchell’s plan will win converts among the large number of lawmakers who now reject such an “employer mandate.”

To most workers, however, the difference between a 50% and an 80% employer contribution may be insignificant, experts say. That’s because most employers already are passing on to employees the cost of health insurance premiums in the form of deferred raises and other payroll cutbacks, economists and health policy analysts said.

“Most of us believe, based on theory and on empirical research, that a mandate ultimately is paid for by the worker,” said Uwe E. Reinhardt, a Princeton University health economist.

“Therefore the lower the percentage paid by an employer, the more honest health care policy really is in terms of who ultimately winds up paying for this,” he said Monday.

The likelihood of another consequence of the Mitchell approach also is largely discounted: that private employers who now pay 80%, which is common in many industries, will cut back to 50% to match the legal requirement.

“Companies would really stay away from doing that because the employee relations implications would be so negative. I just don’t think that’s likely,” said Sharon Canner, assistant vice president and director of employee benefits at the National Assn. of Manufacturers.

The debate over Mitchell’s bill, to be released today, came as President Clinton stumped aggressively for health reform, calling it “the opportunity of a lifetime.”

“Don’t let the fear-mongers, don’t let the dividers, don’t let the people who disseminate false information frighten the United States Congress into walking away from the opportunity of a lifetime,” he told several thousand union members and other reform advocates at Liberty State Park in New Jersey.

The Mitchell mandate would only be triggered if, by some time in the early 21st Century, less than 95% of the population is not covered after a variety of insurance market reforms.

That approach got an endorsement Monday from Leon E. Panetta, the White House chief of staff.

If Congress adopts such a “hard trigger,” Panetta said in an interview here, “then we are assured of universal coverage.”

Analysts said that, from a policy standpoint, Mitchell’s approach of an evenly “shared responsibility” between employers and employees may work better than the 80-20 division proposed by Clinton last year and by House Majority Leader Richard A. Gephardt (D-Mo.) last week in a bill to be debated in the House next week.

While details of the premium costs in Mitchell’s plan are not known, the average premium for a family of four in a typical Fortune 500 company health plan is $5,000 a year. Under Mitchell’s plan, an employer would be required to pay half the cost, $2,500, leaving a like amount to the worker. The cost would break down to about $208 a month for both employer and employee.

The Maine senator’s bill requires employers with 26 workers or more to pay at least 50% of an employee’s insurance premiums, with the worker paying the rest.

Mitchell’s formula, experts said, would allow more efficient targeting of government-provided premium subsidies to needy individuals and families, leading to less overall public spending for subsidies.

“If you make employers pay 80%, somehow most of the subsidies have to go to them because everyone pretends they are paying it,” Reinhardt added, even though employers generally pass the costs on to the workers in one form or another.

On the other hand, “the more you shift payment to the employee, the more then you can target subsidies to them,” he said.

That, in turn, could reduce the government outlay for premium subsidies, according to a recent study by the Urban Institute, a Washington think tank.

Urban Institute researcher Sheila Zedlewski estimated that an 80% employer mandate could require as much as $55 billion a year in subsidies to low-wage small businesses. But that could drop to $17 billion under a 50% employer mandate.

At the same time, she said, the estimated amount of individual and family subsidies would increase from $43 billion to $56 billion, creating a potential gain of $25 billion.

But not everyone shared that optimistic projection. Rep. Sam M. Gibbons (D-Fla.), acting chairman of the House Ways and Means Committee, predicted that every percentage drop from the 80% employer requirement will increase government subsidies by $1 billion.

But more important, Gibbons argued, a less onerous employer mandate will not win over critics. “Those who are opposed to employer mandates at 80-20 are still opposed when it is 50-50,” he said.

Mark Isakowitz, a lobbyist for the National Federation of Independent Business, a vocal opponent of mandatory workplace-based coverage, agreed, saying that any mandate is a new burden to an employer who does not now provide insurance to workers.

“A mandate, whether it’s at 80% or 50%, is still an increase in cost for them,” he said.

Isakowitz said that members of his group also fear that their cost will be increased further by an overly generous, government-mandated standard benefits package. “The question becomes: ‘50% of what?’ ” he said.

Both Clinton’s and Gephardt’s bills impose an employer-employee mandate, requiring businesses to pay at least 80% of a worker’s insurance premiums, with the employee paying the rest.

The President would have the mandate take effect in 1998 while Gephardt would phase it in from 1997 to 1999, starting with large firms.

Both bills also provide financial assistance, either as subsidies or tax credits, to small businesses on a sliding scale, based on firm size and average wages.