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Home / Washington Business - March/April 2005 / A Health Care Dilemma Complicated by Mandates |
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A Health Care Dilemma Complicated by Mandates |
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Written On: March/April 2005 |
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Written By: by Mellani Hughes McAleenan, AWB Governmental Affairs Director |
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In 49 states, including Washington, employers are not obligated to provide health benefits to employees. If health care is provided, employers can define a waiting period, the number of hours an employee must work to be eligible, what portion the employee will contribute, whether spouses or dependents will be covered, and who will pay for any additional costs.
“Pay-or-play” legislation would change all that. Pay-or-play means that employers either provide health care for their employees — play — or pay the government, which will provide health coverage — pay.
SB 5637 and HB 1702, now before the Washington Legislature, would require employers with 50 or more employees to either provide health care or pay the state a tax based on the number of hours worked by the employees. The tax is the equivalent of 85 percent of the price of the Basic Health Plan subtracted by the amount the employer already pays for coverage. The Employment Policies Institute calculates that this legislation would cost employers $1.6 billion per year. According to EPI, $340 million of the tax will be paid by employers who already offer coverage to their employees but who pay less than the amount required by the state. EPI estimates that the bills could result in the loss of as many as 25,500 jobs. The legislation discourages part-time employment and provides enormous economic disincentives to hiring the 50th employee.
The Mandate Problem
Though an employer is not obligated to provide health care, once he decides to do so the state dictates what will be covered through a series of “mandated benefits.” Though well intentioned, mandates increase the cost of coverage. The Washington Policy Center says that this increasing number of state regulations plays a major role in the high cost and inaccessibility of health coverage.
According to “Shaping Up Health Care,” a 2004 report by the Washington Alliance for a Competitive Economy, Washington now has 48 mandates, seventh highest in the nation. However inexpensive each appears separately, the cumulative impact of the mandates is unsustainable for many employers.
The General Accounting Office found that insurance costs are consistently higher in states with increased mandates. In January 2005, the Council for Affordable Health Insurance noted that mandates could increase the cost of basic health insurance as much as 50 percent. And, in 1999, the Lewin Group estimated that, nationwide, for every 1 percent real increase (price increase in excess of inflation) in premiums, approximately 300,000 people lose coverage. This does not take into account those who see their coverage reduced or their share of costs increased in response to higher premiums.
Covering More People
To increase the number of people covered, coverage must be made less expensive, which means reducing or eliminating at least some of the mandates. The Legislature must provide opportunities for employers to offer affordable, flexible health plans. Employers should be able to purchase plans tailored to the needs of their employees. With costs increasing at double-digit rates year after year, the one-size-fits-all approach does not work. Increased costs only hurt those the Legislature seeks to protect — it decreases wages, increases out-of-pocket costs, and results in less or even no coverage.
Now, more than ever, employers cannot afford additional mandates or pay-or-play schemes. The Legislature should place a moratorium on new mandates and conduct an independent study of the impact of current mandates. An impartial cost-benefit analysis would help prioritize mandates in terms of real need and actual benefit.
Employers should have the option to purchase a low-cost, low-mandate plan that covers essential benefits but one that can be tailored to the needs of their employees. The GAO summed it up in 1996: “...to the extent that [employers] must comply with mandated benefits, they lose the flexibility to design the most cost-effective health benefit plan to meet their employees’ needs.”
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