Health care reform in the United States has been beaten nearly to death this year by advocates and critics alike. Yet as the debate moves into October, the final shape of “reform” remains elusive and elastic with construction industry executives anxious about its impact on their companies.
Any change in the system definitely will have impact on contractors and a sweeping change could upend smaller firms — and most construction companies are small-to-medium-sized. The truth of the matter is the reform model in which government would provide most health care services would dramatically change the way every business operates, large or small.
It is impractical to hope that health care reform will be tailored to the construction industry. Nevertheless, small businesses consistently favor certain reform initiatives over others. Were Washington to institute reform along the lines general contractors might lay down, the following features would be among the legislated changes:
• New authority for associations to negotiate insurance packages for their members. Besides gaining clout in negotiating benefits, association insurance negotiators could win lower premiums, if given the opportunity. Associated Builders and Contractors noted that private insurance carriers must mark up premiums as much as 35 percent when dealing with small groups in order to meet profit targets and offset overhead. Whereas associations can provide the same administrative services for their members at a cost of 15 percent or less — if, that is, members are allowed to buy insurance through small business health plan pools.
• Greater leeway for individuals and companies to buy insurance policies across state lines. Many Americans and American companies are limited by state lines in buying health insurance for themselves or their employees. This particularly is a problem in states that mandate insurance benefits and levels of access. The mandates have the unintended consequences of limiting consumer choice and driving up rates. Example: Most healthy young workers neither need, nor want, plans covering health problems associated with middle age, yet they or their employers are required by some state laws to pay for such plans. A bill to ease these mandates has been offered in the House of Representatives since 2005. It would allow insurance companies to sell nationally, across state lines, which would increase competition for each state’s pool of customers and put downward pressure on insurance premiums.
• More emphasis on individual ownership of an insurance policy. The construction workforce is more transient than workers in some other industries because of the nature of the work: Construction occurs at ever changing work sites, rather than in one industrial plant or even in one state. Furthermore, construction workers often pack up their tools and go where there seems to be more opportunity. Having insurance policies as portable as their work skills would benefit construction workers, advocates say. Revising tax laws would let individuals fully deduct the expense of insurance and give them incentive to shop around for policies best suited to their needs, which they then could take with them when they moved to a new job. Companies, in turn, would be freed from obligations to insure the self-insured workers.
• Expanded use of Health Savings Accounts and Flexible Savings Accounts. Health Savings Accounts let individual employees put money aside specifically for health expenses in tax-free savings accounts. Flexible Savings Accounts are the “cafeteria plans” by which individual employees have money withheld for spending on medical procedures or co-payments. Small business advocates contend individuals will take control of their long-term health care planning if they are allowed to buy high-deductible plans combined with HSAs or are allowed to let money in their cafeteria accounts roll over from year to year. Proponents of the accounts believe the absence of personal responsibility for health care has led to abuse of insurance — and to greater health care expense for everyone.
• New rules for medical liability. In monitoring and lobbying Congress for meaningful health care reform, Associated General Contractors complained as late as September about the “failure of legislation to address malpractice reform.” So far none of the health care bills have touched on the issue. Essentially, the threat of lawsuits has driven up the cost of medical care with doctors and hospitals ordering often-unnecessary procedures as protection against being sued. Reducing liability in medical practice is part of a national tort reform movement, which seeks higher legal thresholds for filing of suits and lower limits on settlements. Studies show that reforming liability rules along those lines would reduce health care costs, directly and indirectly, without barring genuine victims of medical malpractice from pursuing effective legal recourse.
• Enactment of tax laws that will truly enhance reform without injuring businesses. It is difficult to stay current on health care tax proposals because they change week to week. Generally, tax laws that business executives resist are the ones that impose taxes to (1) help pay for a mandate, (2) penalize a company for not meeting mandated requirements, or (3) raise costs of a company program to prohibitive levels just to force compliance with a preferred government alternative. Such taxes generally do not increase productivity and, thus, are viewed as anti-business. Whereas tax credits or new taxes that level a playing field for small business or reward company efficiency are viewed as business-friendly. The construction industry generally deems the tax proposals contained in current health care bills to be unfriendly.
While the aforementioned features of a new system can be shown to measurably benefit construction companies and employees, other features in the reform debate are rooted more in political philosophy than in medical processes or good business practice.
One such feature is the so-called “public option.” Supporters of it argue that letting the government compete with private sector insurers in offering insurance will force the insurance industry to offer better deals. They believe true reform will not occur unless government is allowed to compete.
Opponents respond that when government enters the marketplace, private sector competitors are automatically disadvantaged despite inherent government inefficiencies and bureaucracy. That’s because when government sets rules and also plays the game, the outcome invariably favors government; after all, if things go badly for government, the rules always can be changed.
The same philosophical divide is evident in discussions about other mandates in the reform bills. These include the “pay or play” stipulation, whereby companies either will offer their employees insurance as ordered by government or will pay an 8 percent payroll tax. Opponents of the tax insist it is regressive and will hurt lower income employees the most, inducing job losses.
Other mandates under active consideration would force insurance companies to offer health coverage to anyone who wants it regardless of an individual’s health — without regard to actuarial risk assessments, in other words — and to offer the insurance at uniform cost to employees regardless of the actual state of health of individual applicants.
Critics note that such rules of coverage totally disregard the question of cost, both to companies and to the country. Consequently, the almost guaranteed results are job losses, crippling financial burdens for companies and runaway federal deficits. Supporters of unrestricted universal coverage, on the other hand, insist that the true budgetary impact of reform will be minimal.
Taking the negative view on the mandates is the Construction Industry Round Table. In a late September statement, the consortium of 100 CEOs across the United States declared that “there is no question that the types of ’reform’ being discussed are filled with mandates on insurance companies and employers, all of which will drive up the cost of insurance for companies that purchase policies for their employees.”
The latest congressional offering is a Senate compromise bill from a committee chaired by Sen. Max Baucus. Calling it a “good faith effort” and the “best effort to date,” the U.S. Chamber of Commerce still finds it an unacceptable reform vehicle, largely because of tax components.
“We have grave concerns over the vast array of new taxes contained in the bill,” the Chamber said in part. “This bill creates a new tax on benefits that may well spiral out of control to become the next Alternative Minimum Tax. It taxes prescriptions, insurance policies, medical devices, clinics and labs … and all of these taxes will increase costs for employers and workers. The bill does not contain health courts or any other meaningful medical liability reform. Not to mention, the bill creates a massive new entitlement in the form of insurance credits that will burden taxpayers now and in the future. Overall, the bill still needs tremendous improvement.”
President Obama and leaders of the majority party in Congress are pushing for passage this session of health care legislation, one way or another, probably by trimming features and combining other features of several bills until they craft a product with majority support. Their expressed sense of urgency in passing something stems from political calculation rather than from any real crisis in health care. Passage of a reform bill this year or next year is all the same — the arc of medical costs is not shooting up that fast. But votes for the controversial legislation will be easier to cobble together in 2009 than in the election year of 2010 and passage will give a sense of forward momentum to a new presidency.
Legislators who prefer to examine the details of the sweeping legislation in a more orderly way are hoping to slow what they consider a rush to enactment. They concede the need for changes in the system, but see fiscal or procedural disaster in acting in haste.
Companies and business associations — including construction industry groups — continue to lobby for common sense and enduring principles in forging solutions to rising health costs. Lobbying and informing their constituencies is about all the groups can do. In the end, the decision will be made by the two Houses of Congress and businesses will be handed a new system with instructions to make it work. CEG
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