Business Is Developing A Resistance To Health Reform

Mitchell J. Anderman believes fervently in health-care reform. As manager of employee benefits for oil giant Sun Co., he knows how hard it is to rein in health costs--and he's convinced Washington needs to help. But as he watches Congress at work, Anderman increasingly worries that the emerging legislation will create a system downright hostile to big companies. "It's looking more and more like the bills out there won't be fixable," Anderman frets. "Derailing the whole process may be the only course available."

Warning to the White House: Business' support for comprehensive health reform is dwindling. Employers are increasingly disgusted by legislation, written in Congress' four health committees, that piles on new payroll taxes, special breaks for small business, and restrictions on managed care. Fearing a legislative hodgepodge that will raise rather than control costs, Big Business is shifting from passive acceptance of broad reform to sullen resistance.

HOLDING THE CENTER. Corporate America's change of heart will further complicate matters for President Clinton and Capitol Hill leaders during health reform's most crucial phase. Democrats aren't bidding for business support as they try to pass health bills on the House and Senate floors by mid-August. Instead, they're taking a partisan course, daring Republicans to block the popular notion of universal health coverage. But Democratic leaders admit that they can't pass a bill without their party's moderates. And opposition from business could weigh heavily on centrists.

Big employers' growing doubts about reform "aren't helpful," admits an Administration strategist. But the White House contends that its own core of business support is strong. Old-line companies such as Chrysler Corp. and Bethlehem Steel Corp. have backed Hillary Rodham Clinton's plan and will stick with almost any reform that promises to cut the cost of caring for aging, unionized workers. And the Administration long has known that it can't win over small companies--and some big ones such as restaurant operators PepsiCo Inc. and General Mills Inc.--that fiercely oppose Clinton's push for employer mandates.

The group swinging from support to skepticism consists of big employers that offer good benefits to their well-paid but mostly nonunion workers. These companies--including Sun, American Express, DuPont, Mead, and Xerox--have pioneered wellness programs and financial incentives for employees to choose lower-cost managed-care plans. Most of these companies back broad-based health reform--but now they're rethinking their position. "If reform isn't going to help us stop the costs, we've got to take another look," says AMR Corp. lobbyist Edward P. Faberman.

The provisions that concern these big employers include:

-- New taxes. Two of the bills assess payroll taxes on large employers as the price for continuing to run their own benefit plans.

-- Cost-shifting. Big companies now pick up much of the health costs of small business' employees through higher premiums that subsidize the uninsured or by enrolling small-company employees as dependents. Rather than end this cost shift, all four bills would give small business deep discounts, which large employers fear they'll finance. The Senate Labor & Human Resources Committee's bill, for example, would exempt companies with 10 or fewer employees from buying insurance.

-- State flexibility. All the bills give states the freedom to write their own health-plan rules. Multistate employers worry they'll be forced to fragment their benefits to meet varying state rules.

-- Limits on managed care. Health maintenance organizations' ability to manage their provider networks would be restricted. HMOs would be required to sign up any doctor, regardless of quality or the network's need for specialists. That alone would boost a family's premium by up to $1,200, according to the Group Health Association of America, an HMO trade group.

These troublesome measures present business lobbyists with a tough choice. Some argue that companies should try to kill comprehensive reform and throw their weight behind a smaller package: "We may get to the point where the best way to go is incremental reform," says William E. Brown, senior consultant for labor issues for Mead Corp. Republicans are backing such bills, which would couple modest subsidies for the poor with insurance reforms.

Other business interests, however, contend that employers can't stop an initiative on which the Clintons and congressional Democrats have staked so much. Outright opposition would cost Corporate America what leverage it has in fixing the flaws. "We're trying to be constructively engaged," says IBM lobbyist Christopher G. Caine. On July 13, the board of the Association of Private Pension & Welfare Plans, a trade group of benefits managers, adopted a "two-track" strategy: Their lobbyists will seek amendments to the bill but will serve notice that business may swing into opposition if the final product isn't workable.

Business' best hopes for fixing the bills' flaws lie in the Senate. Majority Leader George J. Mitchell (D-Me.), with only a 56-44 majority, will have to court centrist Democrats with close business ties, such as Senators John B. Breaux (D-La.) and Bill Bradley (D-N.J.). Corporate lobbyists hope these moderates will back amendments that restore managed care and cut the legislation's cost to business.

At this point, though, business would be happy to see Congress scale back health reform. Corporate America, which has already slowed the pace of premium hikes from double digits to 6%, has increasing faith in its own ability to heal the medical system. An incremental approach that allows those efforts to continue might not provide everything business wants. But at least it would follow the medical maxim: First, do no harm.

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