What’s So Terrible About Employers Helping With Health Care?

The simplest way to reform health care and to make coverage universal is clearly the “single-payer” system. As with Social Security, unemployment insurance, Medicare and Medicaid, health “insurance” would be provided by the government. “Premiums” could be collected from employees, employers and taxpayers generally; benefits would be paid out by the U.S. Treasury. There is every reason to believe that the added government red tape and bureaucracy would be far less than that imposed today by private insurance companies so bedeviling patients, hospitals, doctors and other health practitioners.

But the Clinton Administration decided not to buck the multibillion-dollar insurance industry and instead has proposed building on what we have: health insurance purchased by employers.

This is, after all, the conservative way to proceed. Other than the aged under Medicare and the poor under Medicaid, the bulk of those currently enjoying health insurance are in plans paid for by their employers. The Clinton recommendations have been to extend the employer-paid health insurance we already have to all employers, except those with very small numbers of workers. And for small employers, there would be government subsidies to help with the costs.

What, then, is the huge furor being drummed up in some quarters against “employer mandates”? We already have employer “mandates” to contribute to Social Security and unemployment insurance. And employers contribute now to health insurance for some 83% of the employees of firms with 100 or more workers and 71% of employees in firms with fewer than 100 workers. This has hardly wrecked American business or created mass unemployment.

What is so terrible about asking employers to contribute to the health insurance of all employees who are not yet covered, thus reaching the bulk of the 15% or 20% of the American people with no health insurance at all?

The main argument is that a mandate will fatally raise labor costs, particularly for small business, driving them out of business or forcing them to lay off workers. But however loudly that argument is repeated, it is fundamentally flawed.

To begin with, it is very doubtful that the provision of health insurance will raise labor costs at all. There are millions of workers and potential workers who are desperate to acquire affordable health insurance. They would add to the supply of labor available to small business and in the main would be willing to work for lower wages or forgo wage increases to get health insurance. Total labor costs--wages plus health care expenses--need be no more than wages without health care today.

Second, even if labor costs were raised for those employers forced to meet health expenses for the first time, they would be raised as well for their competitors in the same situation. In that case, they would have every opportunity to raise their prices--and free-market forces would bring exactly that result. Since labor costs are far from the only cost of business, the price increases would be modest. There would be no squeeze on profits, little or no loss of sales and no reason to either “go out of business” or lay off workers.

So, small businesses imagining that health insurance mandates would impose impossible burdens can only be calculating that they alone would bear the added costs. Since their competitors would also be forced to contribute, they would not be worse off. And with the government subsidizing small employers and insisting that, unlike now, lower-cost health insurance be available to small business, as it is generally today to big business with great bargaining power, small business would probably be better off.

The one argument that some businesses might have for not paying for health insurance is that they can enjoy a competitive advantage over those that do. But if that is the argument, it is surely unacceptable. Why should we allow some businesses to benefit at the expense of all those that do provide health care? When we do, we force the rest of us, including the businesses paying for health care, to meet the added expenses of those who are not covered. When hospitals offer expensive, and often belated, emergency room care to those who, for lack of coverage, did not get medical attention in time, they are driving up the insurance costs for all of the rest of us.

A single-payer plan, as in Canada, might well be better. But we have that in the United States now only for the poor and the aged. The Clinton Administration has decided that states may opt to institute such plans (indeed, Californians will vote in November on Proposition 186, which would do just that) but the vested interests opposed to making single-payer universal are just too great. It will be a sad day if ignorance, confusion, political partisanship and bad economics stop as well the President’s conservative alternative of extending our current employer-financed private insurance to provide for the tens of millions of middle-class working Americans who now are left out.