HEALTH CARE COSTS ON BUSINESS,
IMPACT OF

Throughout the administration of President Bill Clinton there was no escaping intense, detailed discussion of the cost of health care. During 1993 and 1994, President Clinton guaranteed he would veto any health care bill set before him that did not include universal coverage for every American. He called for every employer to offer company-paid health insurance for every employee. He pledged to pay for increased government costs by finding savings in Medicare, by cutting the cost of insurance compliance, and by taxing cigarettes to help cover the uninsured.

In response to President Clinton's plan, Republican and Democratic Congressional leaders sent up trial balloons putting forth dozens of ideas to lower costs, raise taxes, cover all employees, increase deductibles, and put all companies into health care buying alliances. Every plan was supposed to fix health care and slow rising costs without breaking the system or the people who would have to pay for it.

For the most part, professional politicians, whose health insurance is paid for by taxpayers, debated the issue of health care while business leaders, who were expected to pay for the new health coverage, were delegated to a minor role. When asked, "big business," which perceived that it would pay less for coverage, was usually for the plan. "Small business," which perceived it would pay much more, was usually against it. What many observers think was the most dramatic moment in the televised public debate over health care reform came when the president of Godfather's Pizza told the president of the United States that his company could not afford to provide paid health coverage for all his employees. The U.S. president, who had never run a business, thought for a moment, then presented his solution to Godfather's problem: "Just raise the price of your pizza."

By 1998 Clinton's focused had shifted. While he was once committed to providing care for the uninsured, he was now focused on protecting consumer rights and improving care for those who already had coverage. He wanted Congress to install "appropriate federal protections" developed by an advisory commission Clinton had appointed. The commission's report, the Consumer Bill of Rights and Responsibilities, covered such items as choosing health care providers, finding specialists, appeals processes, and access to information. Small business and Republican members of Congress opposed this new action as strongly as his initial health care proposal of 1993-94.

Thus went the debate between business and government over the impact of providing health care to all Americans. Although "health care reform" was pulled from Congressional debate in September 1994, business analysts are sure it will return. At issue then will be the same issue as before, how can government and private business pay for increased annual health care costs estimated to be at least $40 billion.

Health care costs have a huge direct impact on American business. Spending on health care is $1 trillion a year, 12.5 percent of the U.S. gross national product (GNP). Canada spends 10 percent of its GNP on health care and Japan only 6.6 percent.

Those percentages are often used with other figures that show that while the United States leads in the development of health care technology, not everyone pays for it or receives it. Depending on the research source, up to 40 million Americans do not have any health insurance, either because they have lost it because of layoffs, it was not offered when they were hired, or they choose not to pay or cannot afford to pay the extra costs out of their own pocket. One study estimated that 85 percent of the people without health insurance are low-income workers. Others are primarily young and healthy people who have opted out of the system, gambling that they will not become ill and if they do the government will treat them.

Businesses, acting independently of government plans, are working on their own to cut their health care spending. They are doing it by cutting access to insurance. According to the Employee Benefit Research Institute, 64 percent of Americans had employer-provided health insurance in 1996, up from 63.5 percent in 1993, an increase attributed to higher employment rates and stabilizing health care costs—not to increased employer provision of health insurance.

Though some individual companies are trying to save money by cutting their insurance responsibilities, industry as a whole still picks up the tab. According to a 1993 U.S. Bureau of Labor Statistics report, employers are already paying more than $17 billion in an unofficial "subsidy" to cover the costs of uninsured or uncompensated medical care. Another study found that nearly 20 percent of the nearly $2 billion hospitals carry as "bad debt" comes from uninsured workers, and almost $13 billion is "shifted" among workers when the dependents of well-insured workers are carried on the well-insured workers' insurance plans (with more benefits), rather than on the lesser plans offered by the dependents' smaller employers.

Companies that offer insurance to employees are looking at a number of opportunities to lower their costs and the health care industry appears to be helping. Several research studies have found that the rate of health care cost increases is slowing. Analysts credit companies requiring higher deductibles, the increased use of health maintenance organizations (HMOs), and corporations asking their employees to be more cost-conscious consumers of health care. Costs were expected to continue rising during the late 1990s, however, as managed care plans compensated for increased costs by increasing employer premiums.

Asking employees to be cost conscious of health care may prove to be a winning effort for businesses. Successful companies freely tell stories of how employees are cooperating to reduce the cost of health care to the company. One company has tried to bring market competition into play by developing a fee schedule of more than 11,000 medical procedures. Employees are encouraged to use the schedule to check what their doctor is charging for an operation compared to what the fee schedule lists as a fair payment.

More companies are creating "wellness" programs, where employees take responsibility for living healthier and more risk-free lifestyles. This emphasis can be important to reducing the later cost of health care since medical costs for high-risk employees can be 75 percent higher than for other employees.

One company has its own in-house cardiac rehabilitation program that has saved it more than $1 million. Another has its own in-house prenatal program that has reduced the number of premature births experienced by women in its workforce. Another company offers $600 bonuses to employees who wear seat belts and who control four identified risk factors: blood pressure, weight, cholesterol, and smoking. Another bonus is paid into a pool if health care costs come in under budget. Since 1989 the company's health cost increases have averaged just 1 percent a year and in 1993 it spent only 68 percent of its health care budget, leaving a $67,000 rebate that was divided among employees.

What do the nation's employees want? One poll says 76 percent want everyone to have access to universal health insurance. They do not necessarily want the insurance to be paid by the employer, but they want to feel that insurance will be there when it is needed.