Employer mandate directs health care reform debate

Kansas City Business Journal - by Rob Roberts Staff Writer

Vic Allred, owner of five Jazz, A Louisiana Kitchen restaurants, has cooked up a benefits menu that’s rare for his industry.

The entree: Jazz pays 100 percent of health plan premiums for full-timers who have been with Jazz for two years.

To afford the benefit, the Kansas City-based chain pays none of new employees’ premiums, 50 percent after six months and 75 percent after a year.

“Nobody signs up until they hit their two-year anniversary,” Allred said. “They don’t even want to pay 25 percent out of their pockets because they’re young and healthy. So out of 200 employees, only around 60 are in our insurance pool.”

That could change as a result of employer-mandate provisions in pending national health care reform legislation.

Supporters say that requiring coverage by all employers beyond a yet-to-be-determined size threshold is a crucial step toward covering the uninsured and stemming runaway costs. But opponents fear Uncle Sam won’t stop at determining which employees must be covered and what employers must pay. They worry that their ability to control costs through plan design and adjustments would get mandated away.

The question is: Whose message will make the most impact when debate resumes in Congress next month?

John Arensmeyer, CEO of Small Business Majority in Sausalito, Calif., said recent surveys by the organization show that two-thirds of businesses with fewer than 100 employees support an employer mandate.

In Missouri, one of 16 states surveyed, 59 percent of small businesses support an employer mandate, said Arensmeyer, who will participate in an Aug. 25 reform discussion sponsored by the Greater Kansas City Chamber of Commerce.

“That is nuts,” responded Ron Dutton, CEO of Overland Park benefits advisory firm R.J. Dutton Inc. “What employer in America would say, ‘Yes, please regulate this, too, and tell me what kind of plan I have to have, who I have to cover and how much I have to pay’?”

Stephanie Cathcart, a spokeswoman for the National Federation of Independent Business (NFIB) in Washington, criticized the Small Business Majority surveys for their sample size — 200 businesses were surveyed in each state — and wording of the questions.

For initial surveys in Ohio and New Mexico, Cathcart said, the Small Business Majority asked about an employer mandate scenario with a pay-or-play penalty of as much as 7 percent of payroll and discovered opposition by 56 percent of Ohio respondents and 55 percent of New Mexico respondents. Therefore, she said, the group dropped the question from subsequent surveys. That left the question of whether it’s important “to share the responsibility for financing among individuals, employers, insurance companies, providers and government.” A positive answer to that was counted as a yes for an employer mandate.

The “shared responsibility” question, however, wasn’t the only one that measured opinions on employer mandates, Arensmeyer said. Small Business Majority also asked whether companies that don’t offer health insurance should be required to pay something to cover their employees. Fifty-five percent of Missouri respondents said yes.

“There’s definitely a majority of small business owners who feel there should be some obligation to pay,” he said. “And, by the way, we asked those questions without talking about the potential tax credits and other forms of premium assistance that are going to be included (to make coverage affordable to small businesses).”

Arensmeyer also pointed out that House and Senate reform bills in the mill would exempt 85 percent to 90 percent of businesses because of their size.

“So you end up with only 3 to 5 percent of all businesses that aren’t providing insurance who will be obligated to pay something into the system,” he said.

TPP Certified Public Accountants LLC in Overland Park isn’t among the small group that would be forced to pony up. It covers its 25 employees, Managing Partner Dave Perky said, but he thinks coverage should be choice, not coercion.

Some employers fear that the mandating will continue until private insurers are squeezed out and businesses are left with a government-sponsored single-payer system that prevents rolling with the annual punches delivered by spiraling costs.

Perky said TPP faced a 17 percent increase for its health plan this year. But it was able to keep costs flat by raising deductibles by $500.

“That system of keeping premiums in line by raising deductibles seems to be working pretty good for us,” Perky said.

Eric Bur, CFO of Perceptive Software Inc. in Shawnee, also is relatively satisfied with the status quo as it pertains to the company. Perceptive Software, which employs 500, has kept coverage costs in line through minor plan tweaks, largely because of its young work force.

In the current system, part of the tab for larger businesses like Perceptive Software has been shifted to smaller employers, according to the president’s Council of Economic Advisers. A recent CEA report said that small businesses pay as much as 18 percent more than large businesses do for the same coverage because of higher broker fees, administrative costs and adverse selection. Reform, including government-sponsored exchanges that allow small businesses and individuals to shop among competing plans, would reduce the cost disparity, the report said.

The cost of not implementing reform is huge, Arensmeyer said. An analysis conducted for Small Business Majority by Massachusetts Institute of Technology economist Jonathan Gruber indicates that without reform, small businesses will pay nearly $2.4 trillion in health costs in the next decade. Reform would cut that by $855 billion, Arensmeyer said.

But whom are you going to believe?

NFIB long has pushed Republican initiatives, such as association health plans, to make insurance more affordable for small businesses. And Arensmeyer is a board member for the Bay Area Democrats. Also, Small Business Majority’s backers include the Blue Shield Foundation, owned by the health insurer of the same name in California.

That would seem to explain Small Business Majority’s opposition to a public plan priced so low as to make it a stalking horse for single-payer. But Arensmeyer said backers offer no input into policy positions, which are based on surveys of randomly selected businesses. Therefore, Small Business Majority brings an unbiased, research-based voice to the debate, he said.

NFIB’s Cathcart disagreed. She said Arensmeyer is pushing a clear agenda — liberal Massachusetts-style health reform — with misleading information.

“There’s never been anything quite as clear as how small businesses feel about employer mandates,” Cathcart said.

A recent NFIB telephone survey of 1,000 small U.S. employers revealed that 80 percent were against them, she said.

rroberts@bizjournals.com | 816-777-2242

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