Is Health-Care Reform Coming?

While national conversations in the closing weeks of the 2008 presidential election have focused primarily on the U.S. and global economic crisis, still top-of-mind for many employers is how the nation's current health-care system might be overhauled in either a McCain or an Obama administration.

The two plans are dramatically different. In a nutshell, McCain's plan would eliminate the tax exclusion for employer-provided coverage, which would be treated as taxable income to employees. The revenue generated would be used to provide tax credits directly to individuals and families to purchase insurance within a free-market model. Obama's plan would require employers to continue providing employees insurance or pay fees to the government to help finance coverage for the uninsured through new public and private insurance programs or a newly created government health plan, with a focus on providing universal access to health care.

Jonathan Oberlander is an associate professor of social medicine and health policy and administration at the University of North Carolina at Chapel Hill and the author of The Political Life of Medicare (University of Chicago Press, June 2003). In his recent article published Aug. 21, 2008, in the New England Journal of Medicine (NEJM), "The Partisan Divide—The McCain and Obama Plans for U.S. Health Care Reform," Oberlander compares the proposals of the two major presidential candidates. While both plans have elements that have not been tried and tested before, it's difficult to identify whose proposed health-care plan would be better for employers for at least two reasons, says Oberlander. "First, we don't know the key details about each plan, so we don't know with any real precision the impact of each for employers; and second, anyone who tries to project the outcomes of either plan if implemented would be making an educated guess at best."

What Oberlander can say with certainty is that employers themselves are not of one mind on the topic. "Typically, employers do not like mandates, so one logical conclusion is that businesses would prefer the McCain plan," notes Oberlander. Yet, while some employers may not be completely happy with the current system because of the drain of escalating costs, proposals for a bold departure from an employer-based system may be outside the comfort zone of many, says Oberlander. "Businesses may fear what the McCain plan would do to the current employer-sponsored insurance system." For instance, there are concerns that moving toward an individual insurance marketplace would encourage younger, healthier employees to drop their employer-provided coverage as they shop around for less expensive plans, says Oberlander. That could leave employers to cover higher-cost, higher-risk employees, which would introduce additional cost pressures to these plans.

Obama's plan is likewise problematic in the view of some employers. While certain elements of his plan may appeal to employers, such as provisions for reinsurance, Obama doesn't specify a threshold for when the government would step in to cover those individuals who are most sick, says Oberlander. The Obama plan also proposes a play-or-pay mandate: Either employers offer health insurance to employees or they pay a fee to the government to use to provide coverage for individuals who are uninsured. "On the bright side, it's a mandate with an option," notes Oberlander. "The bigger question is what the threshold would be for small employers who would be exempt from the mandate."

A "Better" Plan for Higher Education?
Oberlander doesn't give either plan high marks at this point, in part for their lack of proposed cost controls for implementing new initiatives for electronic medical recordkeeping, chronic disease management, and other programs. As for which plan might be better for higher education employers, that's also difficult to judge, says Oberlander. To the extent that higher education shifts to more flexible and part-time workers—including a trend toward more part-time faculty—an Obama plan may offer more options for coverage, notes Oberlander. Another barometer that may be important to higher education and larger employers in particular is how each plan would address coverage for the uninsured. While a number of reports suggest that the Obama plan would result in coverage of many more uninsured than would the McCain plan, Obama's plan would come at the cost of a bigger role for government, reminds Oberlander.

In the end, both plans likely face an uphill battle, given the budgetary weight of the recently passed $700 billion economic rescue plan. "On the other hand, in times of recession when more Americans are at risk of losing health-care benefits as a result of losing their jobs, that kind of national pain may create the needed impetus for change and provide the political will for reform," argues Oberlander.

The next administration will preside over the first test at health-care reform when S-CHIP (State Children's Health Insurance Program) legislation comes back to the floor this coming spring, notes Oberlander. "The larger question will be whether we can get beyond this initial attempt at reform—and how much further beyond?" Doing nothing seems beyond comprehension to many within the health-care industry, argues Oberlander. "When costs continue to go up, then you are faced with a lot of unpalatable choices of passing along higher premiums and raising co-pays, or cutting dependent-care coverage, or curtailing employee wages—or all of the above."

What can't be denied is that, as a nation, we are at a crossroads and need to decide whether to take a chance on reform even if we don't know exactly how it will work or what it may look like, says Oberlander. He suggests keeping an eye on big business. "If they come over to the side of health-care reform en masse, that could change everything."

Watching Corporate Support for Reform
In his article, "Still in the Game—Harnessing Employer Inventiveness in U.S. Health Care Reform," published in the Oct. 2, 2008 issue of NEJM, Robert Galvin notes that employers are taking a keen interest in current health-care reform debates at a time when costs are growing faster than wages and the pressures to contain expenditures must be balanced with attracting talent. Galvin is director of global health care at General Electric, Fairfield, Connecticut, and professor adjunct at Yale School of Medicine in New Haven.

While there may be no single voice within the business community, Galvin argues that most employers agree on three issues: They are concerned about the high and escalating costs of providing health-care benefits, they want healthy employees, and they want predictability and to maintain control of their destiny. "It is in the DNA of business to be wary of sacrificing authority over that for which it has responsibility," writes Galvin. "Employers believe that consumer choice is essential to improving value, but given the complexity of health-care information, most are convinced that managed consumerism is preferable."

Something else about which employers agree, says Galvin, is that innovation is critical to improving the current system. His message for policymakers is clear: Provide solutions that reflect the heterogeneity of the business community, offer employers alternatives, and address cost containment with policies that dramatically reduce waste while encouraging new approaches. Finally, says Galvin, policymakers must educate businesses about the financial impacts that caring for the uninsured will have on companies and must identify what shared responsibility for the uninsured would mean for employers.

Oberlander agrees that the impact of a growing number of uninsured Americans is an issue that requires greater attention. "A decade ago, 69 percent of employers provided health-care insurance to employees. That figure is down to 60 percent today," notes Oberlander. "If we do nothing, our current employer-sponsored system will continue to unravel, and then in a decade we won't be talking about 46 million uninsured Americans, but many more."

What Employees Think
Given the recent economic news, it's not surprising that, according to findings from the 11th annual Employee Benefits Research Institute's (EBRI) Health Confidence Survey, released October 8, health care is not the issue most Americans consider most pressing today (13 percent compared to 33 percent for the economy and 24 percent for energy and gas prices). Yet, dissatisfaction with the U.S. health-care system is widespread among Americans. Half (51 percent) agreed that the statement "there are some good things about our health-care system, but major changes are needed" best represented their views. Roughly the same percentage responded that the U.S. health care system should be completely overhauled (20 percent) as felt the system needs minor changes, but works pretty well (24 percent).

Concerns of respondents focused primarily on health-care costs, with 42 percent saying they are not too or not at all confident about the affordability of health care, up from 36 percent in 2007. (Separately, a 2007 Health Tracking Household survey by the Center for Studying Health System Change reported that the percentage of Americans who had difficulty paying medical bills increased from 15.1 percent in 2003 to 19.4 percent in 2007.)

With regard to health-care reform, nearly all respondents indicated that extremely or very important goals should be providing high quality health care (93 percent) and making care more affordable (90 percent). Among other priority goals, survey participants responded overwhelmingly that priority goals should include ensuring the system supported development of new medical technologies (87 percent), allowing individuals to select the hospital or doctor of their choice (84 percent), and providing coverage to all Americans (79 percent).

There was also strong support from participants for tax incentives that would help people pay for coverage purchased on their own (87 percent) and to help individuals pay for employer coverage (84 percent). The majority likewise said they would support allowing uninsured Americans to buy into Medicaid or Medicare (78 percent) or to purchase coverage offered to government employees (83 percent). Seventy-five percent of respondents are in favor of requiring employers to pay toward employee subsidized health insurance, while 68 percent supported requirements for all Americans to participate in some form of health-insurance plan.

Despite dissatisfaction with the nation's current health-care system, most say they would not be willing to trade employment-based benefits for cash under the current system. For those respondents with health coverage, when given the choice between $7,500 in employment-based insurance or $7,500 in additional taxable income, 76 percent chose the health-insurance coverage. Of those, 25 percent said their employer would have to offer $10,000-$14,999 in taxable income for them to willingly forsake their coverage. Another 25 percent would require $15,000 or more, and 11 percent indicated that no amount of taxable income would be sufficient to give up their employer-provided coverage. According to the report, these findings are consistent with results of similar questions that were asked in previous years.

Full results of EBRI's 2008 Health Confidence Survey-which examines a broad range of health-care issues including American confidence in the future of the current system and the Medicare program and attitudes about health care reform-appear in the October 2008 EBRI Notes.

Karla Hignite, principal of KH Communication, is editor of NACUBO's HR Horizons. E-mail: karlahignite@msn.com.