Latest Health Reform Bill Rankles Business Leaders

Employers quickly disavowed a revised health care reform bill introduced by Democrats on Thursday, October 29, standing with the health insurance industry in opposition to a publicly run health insurance plan popularly known as the public option.

The House bill contains far less stringent requirements for employers than an earlier version introduced this summer. Still, business lobbyists say the new version remains the most onerous of the health care reform bills introduced so far. It contains the public option plan, more stringent employer mandates, changes to ERISA, and business penalties that would go toward paying for reform.

“Everything we had said we were concerned with is still in there,” said Martin Reiser, chairman of the national Coalition on Benefits, an organization composed of 200 employers and employer groups—including Xerox, UPS and Target—and such organizations as the American Benefits Council, the National Association of Manufacturers and American’s Health Insurance Plans. “It’s a very big disappointment.”

Employers have opposed the creation of a publicly run health insurance plan from the start. Democratic leaders have begun to reach consensus that a publicly run health plan would negotiate rates with providers rather than set them arbitrarily, as rates are set by Medicare.

Employers believe the government would underpay doctors and hospitals. That in turn would lead medical providers to charge private employers and health insurers higher rates. The effect would be to increase costs and send healthier employees to find cheaper rates elsewhere.

“It sets up a fundamental system where the public plan will drain employees from employer system and underpay doctors that would ultimately shift costs to the private sector,” said Reiser, a manager of government policy for Norwalk, Connecticut-based Xerox.

Employers also are concerned about changes the House bill would make to ERISA, the federal law that allows multistate employers to circumvent state insurance regulations. The House bill would allow state law to govern legal disputes over health coverage. It would also restrict changes employers could make to retiree benefits and require employer-sponsored health coverage to meet federal requirements in five years.

The new House bill, which is 1,990 pages, is estimated to cost $894 billion and would reduce the deficit over 10 years by $30 billion, Democratic leaders said, citing an initial analysis by the Congressional Budget Office.

It would prohibit insurers from denying people coverage based on age or health condition and would eliminate lifetime limits on how much health care a person could receive. It would go into effect by 2013 and would include a requirement that all individuals purchase insurance. It would allow people up to age 27 to stay on their parents’ insurance plan.

Flanked by Democratic leaders in a ceremony in front of the Capitol, House Speaker Nancy Pelosi, D-California, likened the legislation to the social safety net laws that created Social Security and Medicare nearly 45 years ago.

“Today we are about to deliver on the promise of making quality, affordable health care available to all Americans, laying the foundation for a bright future for generations to come,” Pelosi said. “The drive for health care reform is moving forward.”

It’s unclear whether Pelosi currently has the 218 votes needed to approve the bill. Republicans immediately blasted the bill, saying it would harm businesses.

“It will raise the cost of Americans’ health insurance premiums; it will kill jobs with tax hikes and new mandates; and it will cut seniors’ Medicare benefits,” said House Minority Leader John Boehner, R-Ohio, in a statement.

Shortly after the bill was introduced at the Capitol, President Barack Obama spoke to small-business owners at the White House. Obama sought to reassure them that the House bill would exempt 86 percent of small businesses from a requirement to provide insurance.

An earlier House version would have exempted employers with payrolls below $250,000 from a requirement to provide health insurance coverage to employees. In the latest version, that threshold now stands at $500,000. A penalty would be gradually phased in for businesses with payrolls of between $500,000 and $1 million that do not provide adequate health coverage.

But these employers remained skeptical that other costs would not get passed on to them, said James Gelfand, senior manager for health policy at the U.S. Chamber of Commerce, who attended the meeting.

“We hope the White House will put their foot down when it comes to forcing small employers to provide something they already struggle to afford,” said Dan Danner, president and CEO of the National Federation of Independent Business, a lobby representing small-business owners. “We encourage them not to hide behind flexible [and often moveable] exemptions with job-killing contribution requirements and heavy penalties, as we’ve seen in the House bill.”

Although the bill would take effect in 2013 if approved, Democrats stressed that it contains immediate insurance relief. If passed, it would immediately extend COBRA payments for laid-off workers until the national insurance exchange is set up.

It would also immediately prohibit insurers from rescinding health policies and it would create a fund to help uninsured Americans with high health risks purchase health insurance in the current market.

The bill is heading for a vote on the House floor, perhaps as early as next week. Action on a Senate bill is likely a couple weeks away.

—Mark Schoeff Jr. and Jeremy Smerd 

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