Notes from the road - employers' health care reform concerns

As the Health Security Express wound its way across the country, employers described their hopes for health care reform. hotel room in Kansas City, Mo. It's the night before the Clintons and Gores arrive to launch their final push for health care reform. A rally is scheduled for noon in the historic town square in Independence, Mo., where hometown son Harry Truman promised to "give 'em hell"--and universal health insurance--S0 years ago, and where President Johnson signed Medicare into law in 1965. Clinton seeks to capitalize on the same historic reference point, in the heartland of America, and not incidentally, in Senate Minority Leader Bob Dole's (R-Kan.) back yard.

A weary but committed band of 120 "Health Security Express" bus riders will be there too. They've traveled some 1,800 miles from Portland, Ore., through Idaho, Utah, Colorado, Nebraska, and Kansas, advocating enactment of a comprehensive health reform bill this year, before mostly small gatherings at churches and union halls. "Pass it Now" is their chant.

Stealing most of the media coverage, however, have been protesters who have met them at almost every stop. Meant to build momentum for reform, and modeled after the Clinton's bus trip during the 1991 campaign, the bus trip has instead become a lightning rod for criticism.

On a hot, blue-sky morning in late July, I joined the bus riders in Denver. Over four days on the road to Kansas City, I listened to the voices of just plain folks, including those who own or run small businesses along the dusty roads outside sleepy Western towns and on the main streets of the cornbelt's quiet small cities, such as Grand Island, Neb., and Salina, Kan. I spoke about health reform with bankers, farmers, car dealers, shopkeepers, shoe salesman, and farm equipment and plumbing suppliers. To a person, they agree something needs to be done, that health insurance and access to health care are serious problems, insurance costs too much, and working people who don't have coverage should. But like a growing number of Americans, they are suspicious and uncertain about what lawmakers in Washington are doing. And they think the solution will cost much more than anyone is willing to say.

But more about that in a minute. In the hotel room I am channel surfing. CNN tells me that the endless crosscurrents of health reform continue to ebb and flow back in Washington. No surprise there. Majority Leader Richard Gephardt (D-Ill.) has introduced his bill in the House. And it's been roundly denounced by Republicans and moderate Democrats. After these days on the road, it's easier to see why people, including most small employers I spoke with, have tuned out the internecine legislative battle. What's the point? Lawmakers don't seem to be working together; there's no clear consensus. But interestingly, views on health reform vary almost as widely throughout the country as they do in Congress. Will these disparate and fragmented perspectives bring health reform to a screeching halt? Or will Clinton pull out an eleventh hour victory? In the heartland, the misgivings mix with hope and the anticipation with anxiety.

In Denver, I met with Jon Jessop, general manager of Davis & Shaw Furniture Co., housed in an oldtwo-story brick building among the encroaching glass and concrete skyscrapers of downtown. The company has 26 employees.

Like most small firms, Davis & Shaw offers only one health plan. It's an HMO, still rare for a small firm. Jessop says he has become a managed care convert. "When I first started following the health reform debate I thought, 'Why don't they just make everybody go with plans like Kaiser?"' he says. Jessop likes the minimal paperwork and the lower cost of the managed care plan. And he says employees have had no complaints.

Also, like many small companies, Davis & Shaw pays a smaller portion of premiums than many large firms--55%. Jessop is blunt: "We'd be opposed to having to pay any more than that." But if he is compelled to pay more, he sounds a theme repeated by many small employers I spoke with, "We wouldn't go out of business. But we would look to trim wage hikes and probably reduce the number of employees, maybe only one or two in our case. The money would have to come from somewhere."

A self-described moderate Republican, Jessop is not wild about the idea of an employer mandate. But he's not strictly opposed to it either. He says he could live with a mandate phased in over time or one that was "triggered" if market forces didn't achieve universal coverage within a certain period of time. "I realize this is a serious problem and that it may take some measure of government control to solve it."

A hundred miles to the east, in Fort Morgan, Colo. (population 11,000), Jan Norrish doesn't agree that managed care is any panacea. "In a small town, people get used to their doctor. He's their neighbor. They are slow to change and they don't want to be told what doctor to go to," says Norrish, an officer at the Fort Morgan State Bank, a local bank that specializes in loans to farmers. As a result, she says her main concern is that the government will force the bank to offer more than one plan. "I don't want that paperwork, the hassle, or the additional administrative costs," she says.

Currently, the bank's 10 employees are covered by Blue Cross and Blue Shield of Nebraska. The bank pays 60% of the premium for a standard indemnity policy that lets employees see whichever provider they want.

Paying its share of the cost is not a financial burden for the bank, Norrish says, though the premiums have been rising steadily in recent years. "We could pay 80% if we had to, but I don't want that to be mandated," says Norrish.

Like most small employers I spoke with, Norrish was not familiar with the idea of regional insurance purchasing pools for small businesses, whether established by the government or local employers. Nor was she aware that Colorado passed a bill last spring authorizing such small business cooperatives. And even those familiar with the idea didn't realize it was such a big part of what the administration, Congress, and many states plan for small business. Norrish's comments, after some discussion of the idea, were typical of those interviewed: "Yeah, but will they work? Everything looks good on paper."

Still, most employers said they'd certainly study the option if it became available. But none wanted the pools to be mandatory for small businesses that already cover their employees, as they are in several proposals before Congress. "I doubt they'd beat the price we get now," Jessop commented. "And I wonder if there wouldn't be a bunch of lousy plans in [the pools] that I wouldn't really want my employees in."

Other employers, even while praising the concept, worried that they'd be lumped in with other businesses that have workers at higher risk for illness, thus raising their experience-rated premium. In general I found that the rationale for community rating has not penetrated deeply in the small-employer community, and that the idea of experience rating is very much alive and well. If Congress passes a bill that does indeed require small businesses to purchase insurance in pools, small businesses may be shocked. They will have to be assured quickly that their costs won't rise.

About 45 more miles down the road, in Sterling, Colo., Jeanne Griffith, who owns Griffith Auto Electric with her husband Jim, echoes the concern about being forced to pay any greater share of her workers' coverage than she already does--50%. "We certainly feel a responsibility to cover our workers and I'd go along with a requirement to pay [50%]...but I'd fight 80%," she says.

At the same time, Griffith says she believes in the goal of universal coverage and that the Clintons are "on the right track." Unlike furniture store owner Jessop, Griffith says she would probably raise prices first if health insurance costs went up rather than cut the wages of the Griffiths' four full-time employees.

This dilemma of how to pay if health insurance costs rise, is at the center of the issue for small employers, and a major concern among lawmakers as well. Both groups recognize the choices are fairly straightforward. "There are only a few things you can do--cut benefits, cut costs, raise prices or become more productive," says Bob Spady, owner and general manager of Bob Spady's Buick, Pontiac, and GM Trucks, in North Platte, Neb. "For us, it would be impossible to raise prices. We operate in a very competitive market," says Spady. "We'd have to cut operating costs. I wouldn't drop the coverage. Maybe we'd get along with fewer salesalert."

Spady is certain that whatever Congress does will add to the cost of insuring his 28 employees. A former high school athlete whose football memorabilia adorn his dealership's showroom, Spady's views on health reform are grounded in the traditional values commonly expressed by many I interviewed: personal responsibility and freedom, private enterprise, duty to family and country. "What concerns me is that this will go the way of welfare and Social Security, and that before long costs will be out of control. We pay for that in higher taxes and higher deficits. The government wants to control everything and they never get it right. The idea of universal coverage is great, but who's going to pay?"

Spady doesn't want the government to require that employers pay for their workers' coverage nor does he want the government to help small companies buy insurance. He believes that will set up a system that will be abused, unfair, and provide perverse incentives. (For example, if companies with fewer than 25 workers were exempt from a mandate, as they are in one congressional bill, that might lead him to cut his workforce from 28 to 24.)

Instead, like many Republicans in Congress, Spady would prefer that the federal government give subsidies to individuals to buy insurance. But he has one strong caveat: The program must not become an additional piece of welfare and "give people an incentive or excuse not to work."

As the Health Security Express buses roll up to the Holiday Inn in North Platte, dusk brings a refreshing coolness to the Nebraska plains. It's the seventh day of their journey. We are greeted by about 100 protesters. A large manure spreader has been placed in the parking lot. Hundreds of placards condemn the Clintons, abortion, big government, and socialized medicine. One reads "Heil Hillary."

As the bus riders unload, an hour-long impromptu dialogue with the protesters ensues. It's clear that most of these people--protesters and reformers alike--don't understand the intricacies of health insurance, the reform proposals in Congress, or the complex economics of health care. The debate in much of America has become a battle over core values: Is access to health care a universal right?

No minds are being changed here, but people are listening to each other. The reform riders are clearly not the radical young liberal types the protesters may have expected. Many are senior citizens, for example. Several are nurses. A dozen or so are disabled. Most have stories about how losing health insurance created turmoil in their lives. Likewise, the reform riders see the protesters as real people with strongly held views about freedom from government intrusion in their lives. Contrary to the image portrayed on TV news clips, the interchange is constructive.

In my moment with Hillary Clinton in Independence, I tell her that. She seems surprised but pleased.

Endless fields of corn fly by at 70 miles an hour as we cross Nebraska. Farmers need farm equipment, and that's the big business in Grand Island, Neb. (population 39,600). About 30 gleaming new tractors and combines sit outside Green Line Equipment Inc., a John Deere franchise on the edge of town. Russ Rerucha is the manager. The company has 20 employees. Green Line pays 100% of employees' health premiums for indemnity coverage. Dependent coverage is optional and the employee must pay all of the cost.

Because the company's premiums rose 24% in the last three years, it raised the deductible this year to $300 from $150. (The company's policy with the insurer has a $1,000 deductible for all employees. But employees only have a $300 deductible. The company covers the balance.) The estimated savings in premium costs this year: $10,000.

Rerucha would like see lawmakers focus more on the rising cost of insurance. He thinks they have dropped the ball on that critical component of reform. His thoughts illustrate, however, why it's so difficult to reach consensus. While Rerucha opposes having the government tell employers they must provide or pay for health insurance, he firmly believes the only way to bring health costs down is if the government sets the price of all medical goods and services. "I think fixed fees, like Medicare uses, are the way to go," Rerucha says. "Insurance is expensive because medicine is too expensive, so that's the place to attack it."

Would he be comfortable with the government setting the price of tractors? Thoughtfully, Rerucha says "medicine is different. It's out of control." Many doctors and hospitals in Grand Island have built "plush new facilities" in recent years, he says. "That's what we are paying for and we shouldn't be," Rerucha asserts.

I asked employers whether, in a reformed system, it would be fair for small businesses to get government subsidies to pay for their workers' health insurance while big businesses the IBMs and General Motors of the nation, which have provided coverage all along--would be forced to pay new taxes to help pay for those subsidies.

There was surprising sympathy for big businesses' plight with respect to health care costs. But there was a feeling, too, that big business gets tax breaks and other advantages not open to small business. Most of those I interviewed came to the conclusion that subsidies to small employers, partially funded by assessments on big business, would not be inherently unfair.

Rerucha voiced a concern also shared by many employers: whatever Congress does should not give employers, large or small, incentives to keep wages low. Coming from small employers who pay mostly low wages, that's a generous position.

Small employers understand that if the government pegged subsidies for health insurance to some annual wage rate ($24,000 or below is the most often referenced figure), employers would have an incentive to keep wages below that to qualify for the maximum subsidy. While such an incentive appears to be advantageous to the employer, it would undermine their efforts to retain good employees by leading the employer to forestall giving deserved raises, small employers agree.

Molly Holcher isn't worried about subsidies, though. As office and benefits manager at the Grand Island Independent, the town's 25,000 circulation newspaper, she knows she probably wouldn't qualify for them. The company has 75 full time employees. Instead, her worst health reform nightmare is that she would be forced to pay the health insurance costs of part-time and contract workers. The company has 30 of the former and several hundred of the latter--delivery truck drivers and freelance photographers and writers. None is covered under the company's indemnity coverage through Blue Cross and Blue Shield.

"Personally, I think some of the part-timers should have coverage," says Holcher, "It's their only job and many of them don't have coverage now. But I don't think we could afford it," Holcher says. As for contract workers, Holcher thinks Congress would be making a big mistake to force companies to redefine them as employees or force companies to pay a share of their health insurance. "That would simply mean we'd search for a way to get along with far fewer of them." Holcher says.

Nebraska-Kansas border goes unannounced. But the flat corn fields begin to yield to hillier terrain as we approach Salina. Leroy Schmidt and John Zimmerman run businesses a mile or so from each other on Santa Fe St., Salina's main drag. They've come to starkly different conclusions about health reform, both of which, however, would comfort the Clintons.

Schmidt owns Ben Franklin Crafts and employs eight people; one of them is his wife Joyce. He offers insurance to all, but doesn't pay any contribution. As a result, only he and his wife are covered on the company's policy. Several of his workers are uninsured. "If we had to pay for health insurance right now, we'd be forced to close. It would take too much of the profit," Schmidt says.

So it's not surprising that Schmidt agrees with Kansas Senator Bob Dole that a mandate on business is a bad idea. In fact, he says he generally supports the senator's political positions. But Schmidt does believe that all Americans should have health insurance. His answer: a single payer system like Canada's. "Everybody would be treated the same. Everybody would be covered. It's the best way to do it," says Schmidt. "Going this other way, it's still going to be government controlled."

Schmidt says he would certainly consider paying a portion of his workers' insurance if the government helps him. But he doesn't believe the government would give him enough to pay the costs. And he would still have to pay a portion that he might not be able to afford. In the absence of a mandate, it will be a calculation millions of small employers will face.

Down the street, Zimmerman runs the Salina Supply Co., a wholesale supplier of plumbing equipment. He has 36 employees on the payroll and pays 75% of their indemnity Blue Cross/Blue Shield premiums, for both individual and family coverage. This year, the company's health costs rose by 25% after some expensive claims last year. Like Schmidt, Zimmerman portrays himself as a conservative Republican. "But on this issue, I think I am riding with the Democrats," Zimmerman says. "I don't think it's a fair system when some employers [pay for their employees' insurance] and others don't. I think they should be required to do it."

That night in Salina, the bus riders are invited to a local farm for a rally. For seating, two-by-six planks are laid across hay bails. It's sunset when we arrive. The vista across fields of wheat is breathtaking. About 100 local farmers are there.

Most are members of the local farmers union, which, a union official says, has been pushing for universal health insurance since 1938. One local farmer tells a particularly compelling story. He says he paid $162 for health insurance for he and his wife in 1970, equal to his profit from the sale of 123 bushels of wheat. This year the couple's policy is costing him $6,982, equal to 2,059 bushels of wheat. That's a 43time increase for health insurance. During the same time period, the cost of wheat has gone up threefold, he tells the crowd.

Finally, the big day arrives. The square in Independence is cordoned off. Security is tight. Protesters, about 150 strong, are kept at a distance. It's yet another rally for the Clintons and Gores but it's a once-in-a-lifetime experience for the reform riders. The president's presence validates the feelings that they are part of something important. Willie Nelson warms up the crowd. "Mama, don't let your babies grow up to be cowboys," he croons. Politicians, I think, would be a better admonition.

Both Gore and Clinton give impassioned partisan speeches, invoking the Truman spirit and the historic opportunity health reform legislation affords. Indeed, the end game of a fight begun a year earlier is at hand. The politics is turning nastier by the day. But for the moment, under the dome of a Midwest summer sky, the president revels in the peculiar joys of touching base with "the people" and the reform riders bask in the attention. Then it's on to St. Louis, Louisville, Ky., Charleston, W.Va., Pittsburgh, Baltimore, and finally Washington, where 535 elected representatives of the people will soon have to cast the most important vote of their lives.

COPYRIGHT 1994 A Thomson Healthcare Company
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