Reform and Jobs

The business community has embraced the idea of health-care reform, hoping that Washington will come up with a method for reining in runaway medical costs. But Congress has spent most of its time so far focusing on ways to cover the 47 million uninsured. All those ways call on businesses to finance expanded access through a "pay-or-play" mandate. That is, employers must either offer health benefits or pay a fine.

Pay-or-play isn't sitting well with the business community, even though 99% of companies with 200 or more employees already offer health plans, as do 62% of those with 199 or fewer. "Employers are worried that government will dictate what they can offer and then hand them the bill," says health benefits consultant Robert Laszewski.

Lobbyists and CEOs are arguing before Congress that pay-or-play would cause many employers to drop health-care benefits as too costly or lay off staff. Plenty of economists beg to differ. They argue that if overall health costs come down, that would offset the cost of insuring staff.

A report just out by Phillip Cryan, an economist at the University of California-Berkeley, concludes that health-care reform may actually boost employment. His work was sponsored by the Institute for America's Future, a liberal think tank, in partnership with the nonpartisan and respected Economic Policy Institute.

Cryan looked at all the various options under consideration by Congress at the moment. In his worst-case scenario—Congress enacts a high 8% "pay" penalty and no cost savings are achieved—166,095 jobs would be lost, or 0.1% of the workforce. But in the most likely scenario, there would be a net gain of 55,365 jobs. Why? New jobs would be created in health care; improved health would raise productivity; some employers who choose to pay rather than play would save money; and, again, the overall rate of health inflation would slow.

Small businesses in particular may come out ahead, according to a study just issued by MIT economist Jonathan Gruber for the Small Business Majority, a nonprofit advocacy group. Gruber estimates that small companies will spend $2.4 trillion on health care over the next decade if reform doesn't happen, leading to a loss of 178,000 jobs in 2018.

He figures the various pay-or-play proposals could bring spending down as low as $1.8 trillion. The reduced spending would cut projected job losses by as much as 72%. "The notion that reform will lead to massive unemployment is simply unsupported by the data," says Gruber.

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