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Congress must address rising costs that are devastating employers, employees or both

Tuesday, January 14, 2003

By Leo W. Gerard and Jeffrey R. Lewis

Skyrocketing health insurance costs are devastating employers and threatening the health security of employees and their families. In 2002, employers absorbed the largest increase in health benefits costs since 1990 -- almost 15 percent. But the buck doesn't stop there. With a soft economy, these increased costs are continually being shifted to employees.

	(Illustration by Ted Crow, Post-Gazette)

Absent a change in federal policy, at best we can expect increased confrontation in negotiations for workers who secure their benefits through collective bargaining; at worst, reduced benefits and a greater personal and financial burden on employees and their families.

The outlook for curbing escalating health insurance costs is bleak. Mercer Human Resource Consulting's 2002 National Survey of Employer Sponsored Health Plans found that employers are being overwhelmed by the rising tide of health insurance costs. Employers with fewer than 500 employees witnessed their health benefit costs grow by more than 18 percent -- from an average of $4,694 per employee in 2001 to $5,492 in 2002.

These kinds of double-digit premium increases are so devastating to small businesses that many can no longer afford to provide any health insurance benefits at all. The Mercer survey found that the number of employers with 10 to 49 employees offering health coverage fell from 66 percent to 62 percent. Rising costs also mean that employers of all sizes are attempting to cut and/or restrict benefits and eliminate many health insurance choices. While many businesses initially absorbed the increases, more are saying it is economically impractical to continue doing so if they are to stay profitable.

In manufacturing, the impact of the crisis is especially acute because the competitiveness of American producers is being undermined in a global market where health care is provided in one fashion or another by every one of our industrialized trading partners.

The result is higher costs for American consumers. Increases in health insurance costs hurt employees in other ways as well, by siphoning away funds that could be dedicated to other uses. For example, the monthly premium for the most popular kind of family insurance coverage for an employee of a small business can amount to the monthly mortgage payment on a $150,000 home.

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Caught in the vortex of the health care crisis, employers face only unhappy options: maintain current benefits with absurd cost increases, confront employees with demands for reduced benefits and/or watch profits dwindle or disappear. Many smaller employers in the manufacturing sector, who already operate on a slim profit margin, must make sure health care costs do not outpace the costs of raw materials. For some small employers, cost increases will ultimately force them out of the market. And every 1 percent increase in premiums adds 300,000 Americans to the ranks of the uninsured.

Employers face a difficult and complex set of choices. They can attempt to stop providing coverage for employees, which hurts workers, their families and their communities. It also hurts the doctors and hospitals that often end up caring for the people who lack the health care insurance coverage, not to mention the taxpayers, who are already picking up the tab for emergency and indigent care.

Alternatively, some companies, already strained for cash to cover salaries, have concluded that the only way to stop the financial hemorrhaging is to change the way they do business. "Change the way they do business" has become code for eliminating employee benefits.

We are confronted with a serious challenge that calls for immediate steps to be taken by the federal government. These should include congressional re-examination of our federal tax laws to determine whether and how employee benefits provisions could be enhanced to help employers with the cost of health care.

They also should include consideration of the government as the insurer of last resort in an industry that has been persistent in characterizing the health care needs of millions of less prosperous Americans as "adverse risks." This characterization is particularly onerous when one takes into account the billions in administrative waste being incurred by a private insurance industry that operates far less efficiently than the Social Security system.

Given this history of waste, recent speculation about the creation of "universal coverage" by industry executives must be scrutinized with a high degree of skepticism.

To ensure that a thorough ongoing examination of current problems and policy alternatives takes place, the president should at a minimum create a National Health Care Cost and Insurance Commission (similar to the Base Closing Commission), with specific responsibility to report back to Congress within 12 months on a plan to solve the nation's health insurance crisis.

Congress would be required to act within 60 calendar days of receiving the report -- either accepting or rejecting specific recommendations ranging from more effectively regulating the insurance industry to creating a federally administered program for universal health care coverage.

While this no-nonsense approach may ruffle some congressional feathers, the reality is that trying to ameliorate the concerns of private sector insurers while simultaneously serving the public interest has so far failed to solve the crisis.

As a nation we must respond to the cost crisis that confronts us with a national strategy that will help employers without bankrupting employees, and that treats health care as a right for all rather than a privilege for some. To do so will not be easy; nor will results be immediate. But the question is no longer whether we can do this; it is how long can we afford not to do it -- not to address the fact that rising health insurance costs continue to spiral out of control. As the Mercer data shows, employers, their employees and families alike are long past having crossed this particularly unhappy threshold of pain.

Leo W. Gerard of Cranberry is international president of the United Steelworkers of America, and Jeffrey R. Lewis of McLean, Va., is executive director of the Heinz Family Philanthropies (jlewis@heinz.org).