Businesses divided over costs, fairness of Clinton's health care program

September 07, 1993|By John Fairhall | John Fairhall,Washington Bureau

WASHINGTON -- At the popular Baltimore crab house Bo Brooks, owner Herm Hannan gladly provides health insurance to his full-time staff of 20. But he'd rather deal with a watermen's strike than President Clinton's plan to require coverage of all employees -- which would add two dozen seasonal workers to his insurance bill.

"My feeling is this is going to be a straw that breaks the camel's back," the restaurateur says of the president's plan, scheduled to be formally announced later this month. "There's very little incentive to be in business now."

Many small businesses fear that the plan would drive up their labor costs prohibitively, forcing them to cut back hiring or even close. But other companies -- especially ones that currently offer comprehensive health plans, like Bethlehem Steel Corp. -- believe requiring coverage for everyone is fair. Their hope is that the president's plan will help them control or even cut their insurance costs in the long run.

Divisions in the business world over health care reform are mirrored in Congress, where government-required coverage for all workers -- "employer mandates" in the parlance of the debate -- is quickly becoming an explosive issue. Forty-one of 44 Republican senators have warned Mr. Clinton that they will oppose such a requirement.

But this battle is one the White House can't afford to lose: Without the mandate, Mr. Clinton can't fulfill his campaign promise to provide insurance coverage for all Americans.

Of the more than 35 million people who currently lack health insurance, most work full or part time or belong to families where the household head works -- but in jobs where there is no insurance coverage. The Clinton plan would take care of them. To the remaining uninsured Americans -- those who have no job and don't qualify for poverty programs like Medicaid, which offers health care -- Mr. Clinton would provide government subsidies.

Mr. Clinton, in an effort to build support for his plan, has begun to promote it as relief for a business world staggered by ever-increasing insurance costs. Employee health plan costs shot up 10 percent last year, to an average of $3,968 per worker -- and that was the smallest increase in five years, according to Foster Higgins, a benefits consulting firm.

The president proposes to restrain future cost increases by creating a national health care spending budget, setting annual limits on insurance premium increases and creating insurance purchasing cooperatives in every state, to give individual employers more bargaining clout. As a result, Mr. Clinton told the nation's governors last month, "health care reform will boost job creation in the private sector, if it is done right."

Behind the scenes, the White House is encouraging sympathetic corporations to speak out in favor of the Clinton plan in an effort to blunt vocal opposition of groups such as the National Federation of Independent Business, which represents 600,000 small firms and has launched a ferocious campaign to gut the president's proposal.

Who benefits, who doesn't

While precise calculations won't be possible until more details of the president's plan are known, it's clear that the impact on businesses would vary widely, reflecting differences in company size, hiring practices, workers' salaries, profit margins and benefits currently being offered.

Though a number of corporate giants, like Chrysler Corp., Xerox and Bethlehem Steel, have already lined up in favor of employer mandates, some other big firms, like Marriott Corp., contend the president's plan would be ruinous. There are also divisions among smaller businesses, most of which provide at least some coverage for workers.

Most businesses opposed to the president's plan complain about the cost. Companies would be required to pay at least 80 percent of insurance premium costs, with workers picking up the other 20 percent. Many businesses already pay more than 80 percent, and they could continue to do so under the Clinton plan.

Experts agree the mandate would hit the smallest, lowest-wage businesses hardest -- restaurants, for example -- because they are least likely to offer insurance now and have fewer resources to absorb a new expense. In response, the administration would subsidize low-wage businesses that employ fewer than 50 people and some larger businesses with low-wage workers.

Everyone would still have to pay something, but the employers' share would be as low as 3.5 percent of their payroll under the Clinton plan. For a company with five workers and a total payroll of $100,000, that would mean annual health care expenses of $3,500, or about $700 per person. For the lowest-wage workers, contributions would be capped at about 2 percent of salary, or $300 for someone making $15,000 a year.

Even with this help, however, many small businesses oppose the plan, because it would result in some new costs and lock them into a system in which they'd have limited control over future expenses.

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