Employers Are Cool to Candidates' Health Care Plans

When it comes to new health insurance proposals, most firms are bipartisan -- they don't like the contenders' ideas very much.

By Martha Lynn Craver, Associate Editor, The Kiplinger Letter

February 25, 2008

Employers agree on two things: Something has to be done about health care costs and the uninsured. And none of the presidential candidates has figured out what. The good news for companies is that no one is proposing a government run, single-payer health care system, which is anathema to the business community. The bad news is that what is being proposed would either undercut the existing system, which firms want to keep, or impose more costs on employers.

Employers have banded together in coalitions to work with the next Congress to tackle the key problems. All agree that something must be done to hold down insurance premiums, which rose 78% between 2001 and 2007. And all want to cover more of the uninsured, an estimated 47 million in 2006, up nearly 9 million from 2000.

Plans offered by Democratic and Republican candidates would expand health coverage through the private insurance market with a supporting role played by public insurance programs such as Medicaid. But employers do not like the way the candidates would go about doing it.

Firms object to John McCain's plan to change the tax code. McCain, the all-but-certain GOP presidential nominee, would provide a refundable tax credit that would replace the existing tax exclusion for employer-sponsored health plans. One leader from the business community called this idea a nonstarter. "Employers simply don't trust government to manage health care coverage as effectively as they can."

Health care policy experts, as well as many in the business community, say removing the tax benefit could cause employers to stop offering coverage to workers. "Removing employers from the equation is revolutionary and may cause small employers to opt out of the system," says Paul Fronstin of the Employee Benefit Research Institute.

"Pay or play" proposals by Democrats Hillary Clinton and Barack Obama are also unacceptable to business. Both candidates would require employers to offer health care coverage to their employees or pay into a fund to help subsidize coverage for those who can't afford insurance. "Mandating employers to offer coverage or requiring them to pay the government…will only force employers to eliminate jobs, move more jobs offshore, stunt future job growth or raise consumer prices," says Helen Darling, president of the National Business Group on Health.

Meanwhile, there are some portions of each plan that employers do like. McCain's plan, for example, would allow small firms and the self-employed to buy insurance coverage through associations. Clinton's plan to make everyone have health insurance is supported by many in the business community. The idea is that with a bigger insurance pool, premiums would be lower for individuals and businesses alike. "Requiring individual coverage will strengthen and stabilize health insurance risk pools by including more healthy people currently without coverage," says Darling.

Employers' biggest gripe: The plans don't do much to hold down spiraling costs. All of the candidates mention that health care cost growth is a critical problem, but none has developed a comprehensive strategy for tackling it. They have a laundry list of initiatives that they hope will hold down costs -- electronic health records, disease management, price transparency -- but all are untested when it comes to holding down expenses, says Fronstin.

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