Together with an individual mandate described in the last post, an employer mandate is an essential part of all legislative health care reform proposals now being considered in Congress. The House bill requires employers with payrolls larger than $250,000 to contribute 72.5 percent of health insurance premium costs for full-time employees and 65 percent for families. The current Senate proposal calls for employers to pay at least 60 percent of premium costs for their full-time employees. Employers with annual payrolls of more than $400,000 would be penalized for non-compliance by paying a payroll tax up to 8 percent of wages (House bill) or $750 for each full-time worker and $375 for each part-time worker (Senate bill).
Employer-sponsored health insurance (ESI) dates back to World War II when the nation rapidly mobilized to a wartime economy. Facing a severe labor shortage and needing a healthy work force, employers had to compete for workers by offering higher pay and health benefits. IRS rulings freed employers from taxes on the costs of health insurance, and these benefits were not taxable for their employees.
We now have an almost 70 year experience with ESI, and that method of financing U.S health care has been steadily unraveling. Employers today are spending an average of about $10,000 a year for health coverage for each employee with a family of four. Premiums have gone up by 120 percent for ESI since 1999, nearly triple the rate of inflation and six times cumulative wage growth. Only three in five large employers now offer any kind of health care coverage, and many are cutting back or eliminating retiree health benefits. Smaller employers are abandoning ESI at a rapid clip. National surveys have found that the proportion of small businesses offering coverage dropped from 61 percent in 1993 to just 38 percent today.
So are employer mandates good health policy? If we base that answer on history and their track record, instead of ideology and wishful thinking, we have to say no. Employer mandates will not give us an effective way to control health care costs, which will only become a bigger burden on employers and make them even less able to compete in a global economy. Taking General Motors as an example, it has had to spend about $1,500 per car for health care, hardly competitive with manufacturers across the border in Toronto that spend one-fifth of that amount on health care within the Canadian single-payer system.
Employer mandates have been tried for many years in a number of states, and have never resulted in universal coverage or cost containment. The longest experience has been in Hawaii – 30 years – where initial gains in coverage later reverted to growing numbers of uninsured and higher health care costs. Later experiments with employer mandates, often combined with individual mandates, have been carried out in California, Connecticut, Massachusetts, Maine, Minnesota, New Mexico, Oregon, Vermont, and Wisconsin.
Over the years, employer mandates have usually been opposed by the business community, including conservative market advocates and the Chamber of Commerce. In the current debate over reform proposals, the business community is increasingly vocal in its opposition to the cost and burdens of an employer mandate. Flash points in the debate now focus on whether ESI health benefits should be taxed and what exemptions ought to be extended to small business.
Forty percent of the private U.S. labor force works for employers with fewer than 100 employees, who are represented by the National Federation of Independent Business (NFIB). The small employer market is one of the most profitable markets for private insurers, but small employers find insurance premiums increasingly beyond their reach. According to the Kaiser Family Foundation, premiums for single workers in small businesses climbed by 74 percent between 2001 and 2008. Not surprisingly, the NFIB is very concerned about the impacts of reform proposals in Congress. There is a basic economic truism that will come into play — make the purchase of something mandatory and its cost will rise, if only because the seller knows the buyer must but it.
What American business desperately needs is containment of its health care costs and a healthy work force in order to compete in the 21st Century. It will not get that from “reforms” now being debated in Congress. If enacted after political compromises with the major corporate stakeholders, a bill will likely make the plight of American business, as well as the broader public, even worse.
Ironically, the goals of health care reform — cost containment, universal access, and improved quality of care — can be met by a paygo option, single-payer national health insurance, which would provide universal coverage and cost less than what employers and the public are paying now. But since that option would reduce corporate profits in a runaway market system, it is still not being considered by most politicians, beholden as they are to corporate money.
John Geyman, M.D. is the author of The Cancer Generation and Do Not Resuscitate: Why the Health Insurance Industry is Dying, and How We Must Replace It, 2008 by John Geyman. With permission of the publisher, Common Courage Press
Buy John Geyman’s Books at: http://www.commoncouragepress.com
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