Weakened Individual Health Care Mandate a Cause for Concern for Employers

Though she was the only Republican to vote for the Senate Finance Committee’s health reform bill, Sen. Olympia Snowe of Maine sounded a note of ambivalence that reflects the feelings of many employers.

“My vote today is my vote today,” she said. “It doesn’t forecast what my vote would be tomorrow.”

That reserved endorsement could summarize the caution many employers also are taking toward the Finance Committee’s bill.

“It’s a very mixed product,” said Neil Trautwein, vice president of the National Retail Federation. “We want reform, but we are extremely concerned by what’s currently on the table.”

Even health insurance industry association America’s Health Insurance Plans offered a tepid endorsement of the finance bill.

“While we agree with the objective of the current proposal, we are concerned about its workability and cost,” said AHIP president and CEO Karen Ignani.

While employers cite admiration for much in the bill, they too have criticized the committee’s decision to water down the requirement that all individuals carry health insurance.

Health insurers have agreed to stop their longstanding practice of denying people coverage based on pre-existing health conditions on the basis that all individuals be required to purchase insurance. The effect would be that policies for young and healthy individuals would offset the cost of caring for sicker and older patients.

The Finance Committee bill, however, includes a reduced penalty for individuals who decide not to carry insurance.

As it stands, the penalty would be phased in over five years beginning in 2013, when there would be no penalty. By 2017, the penalty would be $750 per adult. Most experts say that is not enough to compel young people to buy insurance.

A report this week by PricewaterhouseCoopers and funded by the health insurance industry said the Finance Committee proposal would increase health care costs faster than under the current system. The report said that between 2010 and 2019, the cumulative increase in the cost of a typical family policy under the current proposal will be about $20,700 more than the current system would cost.

While the report has been criticized by Democrats, health economist Jon Gabel said it is correct in pointing out the impact a weak individual mandate could have on health care costs. A weak mandate, he said, will encourage people to game the system.

“It would be better legislation if we do have stronger penalties on people who choose not to buy health insurance,” said Gabel, a senior fellow at the National Opinion Research Center. “If I’m healthy, I can wait until I’m sick to buy health insurance.”

If the Senate does not strengthen the requirement that all individuals purchase insurance, employers may view the Finance Committee’s plan in the same light as the House’s health reform bill, which includes a public plan option that has been maligned by the health care industry and many employers.

Referring to the House bill, James Gelfand, senior manager for health policy at the U.S. Chamber of Commerce, said, “We want that bill to die.”

—Jeremy Smerd

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