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Employees Likely to Pay More Under Health Reform

TIMES STAFF WRITER

Workers are paying more every year from their own pockets for health care coverage, and any reform legislation likely to come out of Congress seems almost certain to accelerate this trend.

At corporations that provide their workers with comprehensive coverage, the company now typically pays 80% and the worker 20% of doctor and hospital bills. The health reform legislation ultimately signed by President Clinton could set a minimum company support level of only 50% and many experts believe that some companies might turn that floor into a ceiling.

The plan proposed by Senate Majority Leader George J. Mitchell (D-Me.) and embraced by Clinton would give American business several years to achieve coverage for all on a voluntary basis. Only if that did not work would companies be forced to offer health insurance and split the cost evenly with their workers. If this 50-50 proposal becomes law, it would be an invitation to business to pay less themselves and make their workers pay more, predicted Richard Brown, director of the UCLA Center for Health Policy Research. He forecast a “sharp decline” in the corporate share of payments above 50%.

“There is not a natural reason for 80-20, it just evolved that way,” said Jonathan Gruber, an MIT economist specializing in jobs and health care issues. He suggested that, if the Mitchell bill becomes law, the employer’s share could easily shift toward 50%.

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The big firms with blue-chip benefits--national companies such as General Electric, Xerox and General Motors--would be much slower to move downward toward the new standard, experts believe. Traditions would deter some of the corporate giants. Union contracts would stymie others.

In this era of corporate downsizing, however, a growing percentage of Americans work at smaller companies. And it will be much easier for management at those firms to announce that the pattern of tomorrow’s health insurance coverage will follow the new standard proposed from Washington.

The Administration, which initially asked Congress to make businesses pay 80% of the cost of health insurance, has embraced Mitchell’s bill, with its 50-50 provision, as a concession to small and low-wage businesses that offer no health insurance now. Small businesses had argued that they could not afford the 80% mandate.

More than that, Mitchell’s bill would not require employers to provide insurance until 2002. Even then, the 50% employer mandate would kick in only in states where the bill’s other provisions, designed to encourage businesses to provide insurance voluntarily, had not boosted the percentage of residents with health coverage from about 85% now to at least 95%.

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Despite these concessions, however, Clinton still faces an uphill fight merely to persuade a majority of his own party in the House and Senate to approve any government-mandated coverage at all.

The House bill, assembled by Majority Leader Richard A. Gephardt (D-Mo.), would require most companies to provide health coverage almost immediately and pay fully 80% of the cost. A mandated employer contribution of this magnitude has attracted stiff opposition from small business and is given practically no chance of surviving in the final health reform bill.

In fact, Clinton still faces an uphill fight merely to persuade a majority of his own party in the House and Senate to approve any government-mandated coverage at all.

On Friday, for example, Sen. Bob Kerrey of Nebraska, an influential moderate Democrat, delivered a stinging rebuff to the White House, saying he would not support the Democratic leadership health plans offered in either house of Congress.

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“The road the President is asking us to travel takes us to a place where federal spending on health care entitlements will have displaced even more of a dwindling pool of household savings,” Kerrey said.

Long before health care became a major topic of conversation on Capitol Hill and in the White House, American businesses were striving to control the runaway costs of the health care that they offered their workers.

With health care inflation rising much faster than the general price level, companies have been under a squeeze, with more of their revenue absorbed by the expenses of medical costs for their workers. Even after adjusting for inflation, corporate spending on health care per employee rose more than fivefold between 1965 and 1991, according to the Employee Benefit Research Institute.

Money that could have gone into wages or profits was channeled instead into health insurance premiums.

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Corporations began their own health cost-control measures gingerly in the early 1980s by asking workers to get second opinions before surgery and by reviewing employees’ medical records before insuring them. When these steps proved ineffectual, companies became much more aggressive in demanding that workers shoulder more of the financial burden of their health care.

Workers “are being asked to contribute more and more,” noted Paul Fronstin, research associate at the institute.

Changes have been sudden. In 1988, an overwhelming 72% of persons covered by private health insurance enjoyed the luxury of selecting any doctor for treatment. By 1992 that figure had shrunk to 46%.

The switch has been to “managed care,” which limits sharply the choice of doctors. The biggest increase has been in so-called “point of service plans,” where the patient gets a bargain rate, perhaps just $5 or $10 a visit, for going to a doctor in a network approved by the insurer. Picking a doctor outside the approved network means paying much more money out of pocket.

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At many companies, money is deducted from paychecks to help pay for insurance premiums. The average monthly contribution for family coverage, $60 as recently as 1988, had increased to $97 by 1991, the last year for which comprehensive data is available, according to a study by the benefits institute.

Another cost-shifting technique comes from increasing the out-of-pocket maximum that a family can pay per year in medical bills before insurance reimburses for all expenses.

In 1988, according to a study by the benefits institute of firms with more than 100 workers, the average maximum expense for a family was $2,004. This out-of pocket limit rose to $2,300 in just three years, meaning that the family was responsible for another $300 a year.

Times staff writer Karen Tumulty contributed to this story.

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