Businesses Wary of Details in Obama Health Plan
New York Times
By KEVIN SACK
October 26, 2008
But the penalty in
That, Mr. Ratner said, would be catastrophic to a low-margin business like his, which has 90 employees, 29 of them full-time workers who are offered health benefits.
“To all of a sudden whack 6 to 7 percent of payroll costs, forget it,” he said. “If they do that, prices go up and employment goes down because nobody can absorb that.”
Writ large, that is one of the significant concerns about Mr. Obama’s health plan, which like this state’s landmark 2006 law would subsidize coverage for the uninsured by taxing employers who do not cover their workers. And it is a primary reason that so-called play-or-pay proposals have had an unsteady history for nearly two decades.
With Mr. Obama’s plan, business leaders say, the devil will be in the unknown details.
Mr. Obama would prohibit insurers from rejecting applicants because of medical conditions, require health insurance for children and create a new federal health plan to provide comprehensive coverage to the uninsured. Those beneath certain income levels would be granted tax credits to make premiums affordable, and small businesses would be offered tax credits to provide benefits.
The tax credits are projected to cost at least $110 billion. Mr. Obama has said he would pay for it primarily by raising income taxes on those making more than $250,000 and by reducing health spending. But when he announced the plan in May 2007, he emphasized that employers would share in the cost.
“We will ask all but the smallest businesses who don’t make a meaningful contribution today to the health coverage of their employees to do so by supporting this new plan,” he said.
Left undefined has been what size firms would be exempted, what constitutes a “meaningful contribution,” and how much noncompliant businesses would be required to pay. Senator John McCain, the Republican nominee, badgered Mr. Obama in two of their debates to define the penalty, but Mr. Obama did not rise to the bait.
“We made a decision even before the plan was rolled out not to decide,” said David M. Cutler, a Harvard economist who speaks for the campaign on health care. “It’s not that there’s a decision out there that we’re not telling. It’s literally that we’ve decided not to decide.”
That may be smart politics. But it makes
business groups nervous that Mr. Obama might impose an
unmanageable burden. They also worry that any time his health
plan faces a shortfall, businesses will be asked to up their
ante, as has happened in
“Play-or-pay can become a blank check to an already overcapitalized health care system,” said Helen B. Darling, president of the National Business Group on Health, which represents 300 companies.
Business groups also have concerns that Mr. McCain’s plan to change the tax treatment of health benefits would erode employer-sponsored insurance.
Mr. Cutler said the Obama campaign regarded play-or-pay less “as a revenue raiser” than as a way of “leveling the playing field.” It would hold accountable those employers whose uninsured workers might seek treatment in emergency rooms or enroll in government insurance plans, with costs subsidized by others through higher premiums and taxes. Mr. Cutler said the expense to businesses would be offset by savings from Mr. Obama’s proposals to reduce health spending, though that is an uncertain prospect.
Several econometric models have assumed that
Mr. Obama would have to set his penalty near 6 percent of
payroll (Mercer, a benefits consulting firm says that large
employers typically pay 15 percent). Recent play-or-pay
Economists believe the cost of health benefits is ultimately shifted to employees through lower wages. When wages cannot be lowered, layoffs may result. Katherine Baicker of Harvard and Helen G. Levy of the University of Michigan have projected that play-or-pay might push 224,000 workers into that category.
When negotiating their health plan,
State officials hoped the penalty would generate a little revenue, but recognized it was not likely to prompt employers to start offering coverage. It raised only $7.7 million in its first year, well under projections. So when a substantial budget gap opened in the $869 million health plan this year, Gov. Deval Patrick asked businesses to help fill the hole.
He compromised on a revised formula that is projected to bring in $30 million by increasing the number and average size of firms that will be penalized. The state expects 1,100 businesses to be fined, up from 855, or about 3 percent of eligible companies.
The deal left business leaders satisfied for
the moment. They recognize that the $295 penalty is a fraction
of the $4,000 that
But businesses worry the state will raise their obligation each year. They argue they have already absorbed costs of insuring 159,000 workers with group coverage since the state began mandating insurance (a total of 439,000 have enrolled, giving the state the country’s highest insurance rate).
“You want the system to work,” said Jon Hurst, president of the Retailers Association of Massachusetts. “You just want to make sure there isn’t more cost-shifting to businesses because they are paying their fair share.”
State officials are gratified that — contrary to national trends — the share of employers offering health benefits has increased slightly. One fear about play-or-pay is that if the penalty is too low employers will stop offering coverage and pay the fines instead, shifting workers to government insurance programs.
But leaders here also are sensitive to the possibility that further increases in the penalty might stymie wage and job growth.
“In this day and age,” said Dr. JudyAnn Bigby, the state secretary of health and human services, “it wouldn’t take much of a change in policy to push some entities over the brink.”