More about these plans' effects on: Intro · Uninsured · Economy · Quality Of Care · Consumer

By Marilyn Werber Serafini, National Journal
© National Journal Group Inc.
Friday, Oct. 26, 2007

Much of the pushback that ultimately doomed the 1994 Clinton health care initiative stemmed from people's fear that they would have to give up their employer health care plan and could end up worse off. Polls consistently show that Americans who have employer-based health insurance like it and don't want to lose it.

Although the '94 Clinton plan would have required most employers to cover their workers, the fear of losing employer-sponsored insurance is well founded. In 2005, more than 150 million Americans were insured through an employer, according to the Kaiser Family Foundation. But with the cost of health care continuing to rise, an increasing number of employers no longer want to shoulder that burden. In 1998, 80 percent of employers offered health insurance; by 2005, Kaiser found, that number was down to 77 percent.

National Journal's judges generally give the Democrats higher marks when grading whether the candidates' plans would encourage employers who offer insurance to continue to do so or to otherwise contribute to their employees' coverage. Hillary Rodham Clinton, John Edwards, and Barack Obama would all require large employers to provide health insurance to workers or contribute to the cost of their coverage.

Clinton would give small businesses a tax credit to offer coverage, and she and Obama would help employers offset the cost of catastrophic care. Edwards and Obama would allow employers to buy insurance through a central purchasing entity, which they say would reduce employers' administrative and premium costs.

Stuart Butler, vice president of domestic and economic policy studies at the conservative Heritage Foundation, said that employers might find it less expensive to pay a percentage of payroll (as in the Obama plan) or some other form of assessment than to maintain employer-sponsored health benefits. John Goodman, president of the conservative National Center for Policy Analysis, sees another downside to an employer mandate. "Employers will respond to a health insurance mandate by hiring fewer employees and turning to part-time and contract labor."

The Republicans' plans would probably cause some erosion of employer-based coverage, but individual coverage would fill in the gap, in Butler's view. He cites John McCain's proposal as triggering a migration from "inefficient small-business plans to plans offered through organizations but still linked to business." McCain would replace the tax exclusion for employer-sponsored health plans with a refundable $2,500 tax credit for individuals ($5,000 for families) who buy health insurance. Individuals could get insurance through any organization or association, including an employer, and workers could carry the policies from job to job.

Under Rudy Giuliani's plan, according to Urban Institute President Robert Reischauer, some employers who now offer insurance might "bail out and let their workers go to the individual market," taking the $15,000 tax exclusion that Giuliani would make available to people lacking access to an employer health plan.

"If we're encouraging people to move away from employer-based insurance, I'm not convinced that's the direction that people want to go," cautioned Robert Blendon, director of Harvard University's program on public opinion and health and social policy. Yet people who don't have insurance through their jobs might feel differently, he added. "People without employer-based insurance really want the tax help," he said. "So some people will rate very highly that Giuliani's encouraging a shift away from employer insurance. But for many employees, they believe they're better off if they have employer insurance."

Perhaps largely because of the Democrats' employer mandates, the judges scored their plans lower on the question of whether they might hurt employers' bottom line. "The pay-or-play element of the Democratic plans could result in 'hardship' for some firms that now do not provide insurance," Reischauer said. Clinton's small-business tax credit "buys a higher score," he said, adding, "Since nothing is required of business under the Republican plans, [employers] can't suffer hardship."

Small businesses typically find it hard to buy insurance at reasonable rates. Most of the presidential candidates say they worry about the burden that health insurance can place on these employers, but the Democratic contenders have not made it clear whether they would exempt small companies from the mandates.

Of the Republicans' proposals, Paul Fronstin, senior research associate at the Employee Benefit Research Institute, said that Mitt Romney and Giuliani could face problems if young, healthy employees bail out of company-sponsored plans. "That would ultimately drive up premiums." In the end, Fronstin said, "whether employers face financial hardship depends on what you believe will happen with overall costs."

Employer Health Care

Hillary Rodham Clinton would require large employers to provide health insurance to workers or contribute to the cost of their coverage. Small businesses would receive a tax credit to encourage them to continue or begin offering coverage. Clinton would provide a new tax credit to employers with qualifying public and private retiree health plans to offset a "significant portion" of catastrophic expenditures if savings are dedicated to workers or to competitiveness. John Edwards wants to require employers to offer health insurance to workers or contribute to the cost of their coverage through his proposed Health Care Markets purchasing pools. Businesses could purchase coverage for workers through Health Care Markets to reduce administrative costs. Rudy Giuliani wants to allow people who have health insurance through an employer to retain that coverage. His plan does not require employers to offer coverage. John McCain would provide all individuals with a refundable $2,500 tax credit ($5,000 for families) as an incentive to buy health insurance. The tax credit would replace the existing tax exclusion for employer-sponsored health plans. McCain would allow small businesses and self-employed people to get insurance through any organization or association. Barack Obama would create a national health insurance exchange to help Americans and businesses purchase private health insurance. Employers would have to provide coverage to workers, make a "meaningful" contribution to their coverage, or contribute a percentage of payroll toward the cost of the public health plan. He would exempt some small businesses. The federal government would reimburse employers for some catastrophic health care costs, but such money would have to be used to reduce workers' premiums. Mitt Romney would allow people who have health insurance through an employer to retain that coverage. The plan does not require employers to offer coverage.