Employers fear power of purchasing alliances - under proposed Clinton healthcare reform plan

Under the Clinton plan, only employers with at least 5,000 workers would be allowed to choose to stay out of regional purchasing alliances that will purchase health care services for most Americans. However, some employers see disincentives to retaining control of health benefits.

Margaret Jordan, vice president of health care at Southern California Edison, a public utility in Rosemead, Calif., says employers that choose to operate as a corporate alliance could suffer financially. For example, under Clinton's plan, corporate alliances would pay a premium to help finance graduate medical education. They would also be required to continue to pay for health insurance coverage for their terminated employees for six months following termination; or may have to pay a 1% payroll tax to help cover unemployed workers, according to the plan. In addition, if the Employee Retirement Income Security Act is amended, states may also be permitted to tax corporate alliances, employers say.

Too much regulation

Helen Darling, manager of health care strategy and programs at Xerox Corp., an office product manufacturer and financial services company in Stamford, Conn., says, "Our concern is that the system could become too regulatory. They could see corporate alliances as bottomless pits from which to get money for many, many things." Xerox would be reluctant to relinquish control of its corporate health benefit programs. Darling says. "The plan would have to be very, very hostile to us continuing to do what we are doing right now because we already operate as a corporate alliance," she says.

Many employers support the parts of the Clinton plan that call for universal access to health care. There is also significant support for the plan's focus on practice parameters to improve health care quality and on the proposals to build systems that will provide data for identifying the most cost-efficient health plans. Employers also favor the plan's proposal that the government subsidize health coverage for the retiring after age 55 and before 65.

Walter Maher, director of federal relations at Chrysler Corp., and automotive manufacturer in Highland Park, Mich., says the administration has proved that it is "mindful of the need to make health care affordable for small companies and is providing larger subsidies as an incentive for them to do so." Indeed, small employers that pay full-time employees an average wage that is less than $12,000 a year would have their contributions capped at 3.5% of payroll. The subsidy would be phased out as average income rose to $24,000 a year.

Under the plan, many employers buying coverage through a regional alliance would pay no more than 7.9% of payroll. Families and individuals with income below 150% of the federal poverty level would be eligible for subsidies to cover their portion of the premium.

With its mandate on employers to provide health care benefits, the plan "will relieve large employers of a great deal of the cost shifting that we have been bearing," Maher says. But despite such bonuses, employers still see problems.

For example, Darling at Xerox, is concerned that, "two-thirds of Americans would be in purchasing alliances that are untested." She suggests that Clinton require small employers to operate health alliances instead of requiring employers with 5,000 workers to do so. "We want this system to be created so that it is strong and sturdy, and it makes more sense to start with the small employers that have more problems with health care," she says. This strategy would allow large employers time to build the systems they will require to manage health care costs, she says.

Can alliances be efficient?

Employee benefits consultants say employers will most likely stay out of regional alliances for the first four years or so and monitor the alliances' progress. Currently, employers want to know "whether they would do better to stay out, or join a regional alliance," says Stephen Caulfield, managing director at William M. Mercer, benefits consultants in New York. Indeed, employers are questioning whether a regional alliance will have the ability to take inefficiency and excess capacity out of the health care system, he says.

For the most part, large employers will likely continue to manage health care costs independently, rather than give that up to an "unknown government bureaucracy unless there's a powerful incentive to come in," Caulfield adds.

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