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Prescription for Progress?

Conditions are ripe for health-care reform, but daunting obstacles are solidly in place.
Alix Stuart, CFO Magazine
June 1, 2009

Capitol Hill will be steamier than usual this summer as lawmakers press ahead on health-care reform. House and Senate leaders have pledged to have legislation on the table by late July, and President Barack Obama has urged both houses to make that deadline. "We've got to get it done this year," Obama said. "We don't have any excuses."

To be sure, conditions may be riper than ever for widespread reform, what with a previously hostile health-care industry consortium already volunteering to slow the growth rate of cost increases by 1.5% per year. But the enormous changes being contemplated and the staggering costs associated with them, which could draw heavily upon corporate coffers, ensure that even if the road to reform is fast, it will not be smooth. Among the key questions for the business community:

Should employers be forced to pay for health care?
In general, few companies are lobbying to offload health-insurance responsibilities to the government, if for no other reason than to maintain some control over their benefits spending. Even small businesses say they'd like the option of continuing to offer health coverage, along with other options such as contributing toward plans employees could buy themselves, according to National Federation of Independent Business research. In trying to enforce universal coverage, though lawmakers are considering whether to require companies to either provide coverage or pay into a national insurance pool from which their employees could buy coverage ("pay or play," in Washington-speak). That prospect, part of informal plans already released by the Senate Finance Committee, "is being seriously considered," says Marisa Milton, vice president of health-care policy and government relations for the HR Policy Association. Not surprisingly, it poses big concerns for business. Recent research from the NFIB estimates that it could cause the loss of more than 1.6 million jobs, the majority from small businesses. However, the costs would vary widely depending on the minimum level of mandated coverage and associated penalties.

To what extent should the government provide health insurance?
A government-controlled plan of some sort is likely to emerge, at least to cover the 47 million people who are currently uninsured. If limited to that group, the plan could be good news for business in that it would reduce subsidies to the uninsured that are implicit in current premiums. But if a public plan with rich benefits were offered more broadly, "we could see an erosion of the employer-based system," because employers continuing to offer coverage would bear higher costs to subsidize the government effort, says Tom Lerche, health-care practice leader with Aon Consulting. An analysis sponsored by the HR Policy Association estimates that a plan that reimburses health-care providers at current Medicare rates (as is likely to be proposed) would add anywhere from $43 billion to $124.5 billion per year to employers' collective insurance tab.

Should the plan be a federal one or vary by state?
Currently, ERISA allows companies to ignore state laws and offer the same coverage for workers nationwide. If this preemption disappears and companies have to follow state laws, "it would be a major negative," says Lerche. Thankfully, he says, the current risk of this happening appears "minimal," but still needs monitoring.

Health-care premiums still rise annually by double digits. Rates for 2002 through 2009.


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