Posted on November 6, 2007

Why would Big Business defend ERISA?


Big Business launches healthcare lobby group

By Jeffrey Young
The Hill
November 6, 2007

As state legislatures, Congress and the presidential candidates turn up the volume on national healthcare reform, more than 50 of America’s largest corporations and most powerful lobbying organizations are joining forces in a campaign to protect their stake in the status quo.

The newly formed National Coalition on Benefits will spend the next two months working to convince members of Congress that the health benefits they provide their workers, through a federal exemption for state insurance regulations, are an essential component of the current system that should not be undermined in any reform initiatives.

The corporations making up this umbrella group include some of the largest employers in the country, from AT&T to Xerox; trade associations, such as the U.S. Chamber of Commerce and the Business Roundtable; and health insurance companies like Aetna and UnitedHealth Group.

“Our statement is: This is the one part of the healthcare system that’s working,” said Andrew Mekelburg, vice president of federal government relations for Verizon Communications.

Under the Employee Retirement Income Security Act of 1974 (ERISA), companies that bear the full costs of their health benefits, as opposed to purchasing an insurance package for their workers, are exempt from state regulations of health insurance. Most large companies offer ERISA-regulated health plans because, among other reasons, this approach permits the companies to offer uniform benefit packages to employees in all 50 states. Otherwise, the firms would have to comply with varying insurance requirements, such as mandates that certain services be covered, from state to state.

Democratic candidates such as Sen. Hillary Rodham Clinton (N.Y.) and former Sen. John Edwards (N.C.) have proposed requiring individuals to purchase coverage and/or requiring employers to provide it. Republican candidates such as former New York Mayor Rudy Giuliani and former Massachusetts Gov. Mitt Romney have called for changing the tax treatment of health benefits and for greater state flexibility.

Either of these approaches could include changing ERISA, Mekelburg said. “Both of them aren’t quite the right answer.”

“I don’t think there’s much potential for a lot of states doing their own thing in the absence of federal [legislation],” said Paul Ginsburg, president of the Center for Studying Health System Change, a nonpartisan research institution.

Ginsburg said that these companies have legitimate concerns about the costs associated with allowing states to circumvent ERISA or with levying new federal requirements on their benefit plans. “It’s not just reluctance to change,” he said.

Nevertheless, Ginsburg expressed concern that if such powerful interests stake out a strong position against the healthcare reform proposals emerging from the presidential candidates and Congress, it could have the effect of stifling the political debate before it really begins. “That’s the most worrisome,” he said.

“It’s so different from the spirit that I’ve seen over the past year for all these ‘strange bedfellow’ coalitions” promoting reform, Ginsburg said.—lobby/big-business-launches-healthcare-lobby-group-2007-11-06.html

National Coalition on Benefits (press release):


By Don McCanne, MD

What is going on here? Big Business is being strangled with escalating health care costs. General Motors, a member of this coalition, is in the process of dumping its health benefits program into a union controlled VEBA (voluntary employees’ beneficiary association).

With the escalating push toward comprehensive reform, Big Business has an opportunity to dump its health benefits headache onto others through individual mandates to purchase private plans, or onto a national health insurance program. Why should they want to protect ERISA and their self-funded health benefit programs?

An old rule is that when something doesn’t seem right, start by looking at the money involved.

Obviously, adoption of a national health insurance program would shift the financing of health care to the tax system. But what about an individual mandate to purchase private plans? Private health insurance that provides adequate financial protection is now so expensive that average-income individuals can no longer afford it. An individual mandate would require a massive infusion of taxpayer funds in the form of vouchers or tax credits. No matter the model, any program that is truly universal and is effective in preventing financial barriers to care will require a massive infusion of tax funds.

Who will pay those taxes? Moderate- and low-income individuals can no longer pay their share. Small businesses are also finding it very difficult to fund health benefits. Innovative tax policies such as taxes on tobacco or on casino gambling can’t even make a dent in the amount needed. Obviously Big Business is looking at this, and what is their perception?

Members of the policy community across the political spectrum agree that we need to end the employer link to health insurance. The conservatives believe that it is time to place individuals in charge of their own coverage, although the conservative Heritage Foundation understands that this is a non-starter unless individual plans are heavily tax subsidized.

Liberals oppose the unfair regressive tax policies that support employer-sponsored plans and recognize that a more equitable method of health care financing must be adopted. The problem for the liberals is that they have been unable to sway the anti-tax populous into supporting public funding. So where can they find the money? Ah, Big Business is loaded with dough. So including an employer mandate would allow us to tap those funds even if it depends on perverse tax policies. But gaining the support of business by agreeing to limit corporate tax increases likely would not not work since payroll taxes then would have to be increased, still increasing business overhead. (Though economists agree that payroll taxes are part of the employees’ benefit packages, they are still part of the employers’ overhead expenses. It is likely that payroll taxes would play a role in the future financing of health care, but the extent should be set by policies designed to make the tax system as equitable as possible.)

OK. Let’s concede that Big Business will have to be a major player in health care financing. They already are carrying a heavy burden with their self-funded ERISA-protected plans. Since a universal public insurance program would reduce administrative waste, wouldn’t they prefer to change to a program that would save them at least some of their costs?

From the perspective of administrative waste, the self-insured plans of large businesses are the most efficient programs provided by the private sector. Big Business rightfully would be suspicious of claims that a single payer system would provide enough savings to offset their loss of control over their employees’ health benefit programs.

But there’s a much greater issue. Who are the employers insuring? Their own healthy workforce and their young healthy families. They are paying for a large sector of our population that happens to have the least expensive health care needs. Imagine shifting Big Business to a universal program, whether public insurance or mandated private plans, that includes the higher-cost sectors of our population. They do have the legacy costs of their retirees, but that still doesn’t approach the costs of introducing all high-risk individuals into the universal risk pool.

Single payer advocates may claim that we’ll save Big Business money, but if you were a corporate health benefits manager, would you believe it? “I think that we’ll just stick with our self-funded program, thank you.”

Policy lesson: We desperately need a universal risk pool that is equitably funded. Equitable… fair… fair for everyone. Low- and moderate-income individuals can no longer afford their pro rata share and will need help from the wealthier sector of our society. We can gain the support of much of that sector if the members are convinced that the system would be truly equitable, and we need to show them now how that would work. Nailing Big Business alone to the wall is not equitable.