WASHINGTON -- At the popular Baltimore crab house Bo Brooks, owner Herm Hannan gladly provides health insurance to his full-time staff of 20. But he'd rather deal with a watermen's strike than President Clinton's plan to require coverage of all employees -- which would add two dozen seasonal workers to his insurance bill.
"My feeling is this is going to be a straw that breaks the camel's back," the restaurateur says of the president's plan, scheduled to be formally announced later this month. "There's very little incentive to be in business now."
Many small businesses fear that the plan would drive up their labor costs prohibitively, forcing them to cut back hiring or even close. But other companies -- especially ones that currently offer comprehensive health plans, like Bethlehem Steel Corp. -- believe requiring coverage for everyone is fair. Their hope is that the president's plan will help them control or even cut their insurance costs in the long run.
Divisions in the business world over health care reform are mirrored in Congress, where government-required coverage for all workers -- "employer mandates" in the parlance of the debate -- is quickly becoming an explosive issue. Forty-one of 44 Republican senators have warned Mr. Clinton that they will oppose such a requirement.
But this battle is one the White House can't afford to lose: Without the mandate, Mr. Clinton can't fulfill his campaign promise to provide insurance coverage for all Americans.
Of the more than 35 million people who currently lack health insurance, most work full or part time or belong to families where the household head works -- but in jobs where there is no insurance coverage. The Clinton plan would take care of them. To the remaining uninsured Americans -- those who have no job and don't qualify for poverty programs like Medicaid, which offers health care -- Mr. Clinton would provide government subsidies.
Mr. Clinton, in an effort to build support for his plan, has begun to promote it as relief for a business world staggered by ever-increasing insurance costs. Employee health plan costs shot up 10 percent last year, to an average of $3,968 per worker -- and that was the smallest increase in five years, according to Foster Higgins, a benefits consulting firm.
The president proposes to restrain future cost increases by creating a national health care spending budget, setting annual limits on insurance premium increases and creating insurance purchasing cooperatives in every state, to give individual employers more bargaining clout. As a result, Mr. Clinton told the nation's governors last month, "health care reform will boost job creation in the private sector, if it is done right."
Behind the scenes, the White House is encouraging sympathetic corporations to speak out in favor of the Clinton plan in an effort to blunt vocal opposition of groups such as the National Federation of Independent Business, which represents 600,000 small firms and has launched a ferocious campaign to gut the president's proposal.
Who benefits, who doesn't
While precise calculations won't be possible until more details of the president's plan are known, it's clear that the impact on businesses would vary widely, reflecting differences in company size, hiring practices, workers' salaries, profit margins and benefits currently being offered.
Though a number of corporate giants, like Chrysler Corp., Xerox and Bethlehem Steel, have already lined up in favor of employer mandates, some other big firms, like Marriott Corp., contend the president's plan would be ruinous. There are also divisions among smaller businesses, most of which provide at least some coverage for workers.
Most businesses opposed to the president's plan complain about the cost. Companies would be required to pay at least 80 percent of insurance premium costs, with workers picking up the other 20 percent. Many businesses already pay more than 80 percent, and they could continue to do so under the Clinton plan.
Experts agree the mandate would hit the smallest, lowest-wage businesses hardest -- restaurants, for example -- because they are least likely to offer insurance now and have fewer resources to absorb a new expense. In response, the administration would subsidize low-wage businesses that employ fewer than 50 people and some larger businesses with low-wage workers.
Everyone would still have to pay something, but the employers' share would be as low as 3.5 percent of their payroll under the Clinton plan. For a company with five workers and a total payroll of $100,000, that would mean annual health care expenses of $3,500, or about $700 per person. For the lowest-wage workers, contributions would be capped at about 2 percent of salary, or $300 for someone making $15,000 a year.
Even with this help, however, many small businesses oppose the plan, because it would result in some new costs and lock them into a system in which they'd have limited control over future expenses.
"I don't think we really have a health care crisis," says Mr. &L; Hannan, who is also an insurance broker. "Certainly we've got a problem with the way the current system is priced. But I think a certain part of that is government intervention."
Shopping around for insurance for his crab house, Mr. Hannan buys a plan that costs him about $150 per month for individual coverage for each worker, and provides them with doctor, hospital and drug benefits. Workers are responsible for the $200 annual deductible and a 20 percent copayment on their medical expenses. Workers also have the option of paying from $150 to $250 more a month for family members.
At DEI, Inc., an electronic security system firm in Baltimore, president Thomas Steg believes strongly in providing comprehensive individual and family coverage for all 58 of his workers. But it comes at a high, and ever-rising, price: an average of $470 per employee per month, or almost $6,000 a year.
"We are a very employee-sensitive company," he says. "We have profit sharing and a lot of very comprehensive benefit packages."
He knows that small companies pay most in the current insurance market, because they are unable to get the lower per-worker rates that big employers receive. But, while he might benefit from insurance reform -- an important part of Mr. Clinton's plan, which would level rates for small and big employers -- he, too, would prefer less government action.
Terming mandates "wrong," he says, "I just don't think it's government's job. We're just so socialistic."
Sharing the burden
Larger businesses -- most of which already provide health benefits -- see mandates as a bottom-line fairness issue. What rankles them is that companies which don't cover workers, indirectly dump that cost onto companies that do.
This cost-shifting occurs in two ways. It happens in cases in which a company offering family coverage pays all of the health bills of its workers and their dependents, including those who work at firms that provide no insurance.
Cost-shifting also occurs when uninsured people get treated at hospitals like Johns Hopkins in Baltimore. They're not turned away, but Hopkins folds the cost of their care into the rates paid by patients with insurance plans.
"There are a lot of people today," Mr. Clinton said recently, "that get a free ride out of the present system who can afford to pay something." According to the National Association of Manufacturers, the failure of all businesses to provide coverage added $11.5 billion to the bills of those that did in 1991.
This has led many corporations to a position that would have seemed heresy a few years ago: Government intervention is needed to reorganize the health care system.
Bethlehem Steel's health care costs have skyrocketed by about $85 million since 1989, to roughly $250 million a year, despite efforts to control them, according to Benjamin Boylston, vice president for human resources for the Pennsylvania-based company.
The steelmaker has joined the National Leadership Coalition for Health Care Reform, a growing group that endorses universal coverage and an employer mandate. Its 100 members include about 60 corporations, among them Xerox, Westinghouse Electric Corp., Scott Paper Co. and the Quaker Oats Co. Labor unions, consumer groups and medical associations, such as the American College of Physicians, also belong.
The U.S. Chamber of Commerce, long a foe of mandates, also offers qualified support. As long as there are "adequate subsidies for small business," the "chamber supports a system of managed competition in which employers, individuals and government all share responsibility for financing health care," says Kristin Bass, manager of human resources policy.
Managed competition refers to the system of purchasing cooperatives Mr. Clinton would create. But the chamber has not endorsed the Clinton plan. It has reservations about the regulatory powers the administration might give the purchasing cooperatives, and it opposes a national health spending budget "because we're not comfortable it can be enforced, that it would work," Ms. Bass says.
Mr. Clinton has a long way to go to persuade the chamber to support his plan -- and even less hope of winning over companies like Marriott, which operates hotels, restaurants and other businesses.
Marriott paid $140 million for health care last year for its 82,000 workers and their dependents. The company plan covers about 65 percent of workers' medical costs, not the 80-percent Clinton threshold. Nor does Marriott provide benefits to about 40,000 part-time employees, for whom it would also have to pay something under the Clinton plan.
The added cost of complying with the Clinton proposal might be as much as $160 million, says Bob Dankmyer, vice president for corporate benefits. Marriott had a net profit last year of about $400 per worker, he says, and can't afford such a huge cost.
Even though the company strongly supports reform ideas such as managed competition, which the White House endorses, supporting the present White House plan remains an impossibility. "For us," Mr. Dankmyer says of the Clinton plan, "it's a matter of life and death."