B.E. 100s CEOs speak out on health reform; the leading African-American chief executives debate the merits of employer-mandated health care proposals.

The leading African-American chief executives debate the merits of employer-mandated health care proposals.

SINCE THE UNVEILING OF THE HEALTH Security Act last September, the debate over President Clinton's proposed plan has often centered on the ability of small business to pay for employer-sponsored health insurance. The argument? Most small businesses cannot afford employee health insurance. And to mandate that they pay for it will force some companies to cut jobs or, worse, go out of business.

But the facts don|t necessarily bear this out. According to the Bureau of Labor Statistics, 71% of full-time employees at companies with fewer than 100 people had some form of health care coverage in 1992. About 5% of part-time employees at companies with fewer than 100 workers received health insurance through their employers. According to the Employee Benefit Research Institute, for 81.1 million workers, or 71.9% of the U.S. workforce, employers are the primary source of health insurance benefits.

Where do BE100 companies stand in the debate? An informal sampling of BE100 CEOs found that, for most companies, the issue was not whether every one deserves health insurance. Instead, the CEOs questioned the extent to which employers would have to participate, how flexible the cost of coverage would be and how good the quality of benefits would end up being.

At the center of the debate is the Clinton plan, which calls for universal health insurance via employer-mandated coverage with a standard package of benefits that businesses would buy through regional purchasing alliances. A national health board would determine the budget for health care coverage and make changes in benefits. Employers would pay 80% of the premium for full-time employees and a prorated share for part-timers, with a cap on premium contributions ranging from 3.5% to 7.9% of payroll--depending on the size of the company and the average wage paid. States would be required to enact legislation that would make health care reform possible by 1998. O ther proposals have been put forward, including a "single-payer" universal system like Canada's in which the federal government would finance all medical care via federal taxes. Two other proposals--the Cooper plan introduced by Rep. James Cooper (D-Tenn.) and the Chafee plan proposed by Sen. John H. Chafee (R-R.I.)--offer variations on the Clinton plan. For instance, the proposals include: mandatory health care purchasing groups for companies with fewer than 100 employees; a standard benefits package to be approved by a health care standards commission; and voluntary employer participation in health care purchasing alliances. While the Chafee plan guarantees universal coverage through individual mandate, the Cooper plan only proposes universal access. However, neither the Cooper nor the Chafee plan has caps on health care premiums because neither plan requires mandatory employer participation.

Since most businesses, large and small, offer some health care benefits, the real issue that has been a thorn in the side of most companies is an ideological one. Should government determine what benefits companies should offer their employees and force employers to pay for and participate in that system?

In testimony given last October in a joint hearing before two subcommittees of the House of Representatives Committee on Energy and Commerce, Luther M. Ragin Jr., vice president and chief financial officer of Earl G. Graves Ltd., pointed out that the debate over health reform should not center on whether the current health care system needs changing, but how to accomplish it. "Our company believes that universal access to quality, cost-effective health care, combined with individual responsibility are critical elements of any reform package," said Ragin.

All BE 100 companies surveyed offer health insurance, subsidizing 50% to 100% of the cost of the plans. Some employers say they subsidize employees only; others also finance costs for family coverage. The former say they make family coverage available so that employees can purchase extra coverage at their own expense. * Universal coverage, yes; employer mandate, maybe. No one argues that universal health care coverage isn't needed--or wanted. The question is: Who should pay for it?

Clara Taylor Reed, CEO of Belzoni, Miss.-based Mid-Delta Home Health Inc., says she personally supports universal coverage "because all people deserve quality, preventive care." Reed currently covers 100% of employee medical premiums at her 345-employee home health care and medical equipment and supplies company, but she doesn't contribute to family plan costs. Her 29 part-time employees who work at least 35 hours a month are also covered.

For companies like Mid-Delta that can afford higher benefit costs by charging higher fees to their customers, the cost of health care isn't as much of an issue. Floyd Gary Thacker, president and CEO of the Atlanta-based construction firm Thacker Engineering Inc., also believes that universal coverage is needed, even with an employer mandate. "If [universal coverage] increases the pool [of insured employees], it may decrease the cost to employees", says Thacker, who splits the cost of premiums 50-50 with his 126 staff employees. "If we have to, we can afford to [insure all workers], but we'd pass the costs along to the client."

Other BE 100 companies aren't so upbeat about the impact of health care reform. "I think the cost of doing business will be higher," says Mel Farr, CEO of the Mel Farr Automotive Group in Oak Park, Mich. Some small business owners like Farr believe that if employers are forced to subsidize premiums to the tune of 80% and cover all employees, including part-timers, it will hurt business.

Farr says that companies will end up paying higher premiums. "So, it means the cost of doing business will be higher," he argues. Farr now pays an average of $1,600 per employee or 50% to provide single and family coverage for his 274 eligible employees. If he had to extend those benefits and foot more of the bill, he says, "We'd have to find some way to offset the cost, so we'd probably raise prices to the consumer. We'd also probably have to reduce personnel," he adds.

Carvel E. Simmons of Simmons Enterprises Inc. in Cincinnati says that if he is forced to insure part-timers in his four enterprises (trucking, day care, an agricultural operation and an insurance agency), he simply won't hire any. He suggests that the level of contribution be left up to individual employers. "An employer knows his financial limits better than anyone, so we don't need the government imposing debts on us," he says. Instead, he suggests that only the amount of coverage be uniformly set. " [This way], while benefits would be uniform," he says, "the premium structure would be different."

Mel Farr also objects to imposing one premium structure on all companies, regardless of size. He thinks employers and employees at smaller companies should contribute to a plan equally. "I support the idea of a national plan," he says, "but [the cost] shouldn't be on the backs of small business."

Seemingly taking a cue from these CEOs, concerns, Senate majority leader George J. Mitchell (D-Me.) has thrown three modified, albeit cheaper, versions of the Clinton plan into the ring. While universal coverage would be guaranteed, Mitchell's suggestions would either reduce what employers pay thereby decreasing the cost to government, limit the benefits provided or increase the contribution by individuals. * Control health care costs. For most BE100 companies, the most vital issue is how to stem the tide of insurance premiums and health care costs. "My concerns are for smaller companies for whom health care costs are a significant expense," says Carlton L. Guthrie, CEO of Trumark Inc., a metal stamping and manufacturing firm in Lansing, Mich. The company pays 80% of health care benefits for employees and their dependents via a preferred provider organization (PPO).

As far as Guthrie is concerned, "I'm not sure that the cost savings of universal coverage will be offset by reduced administrative costs." The company's current plan--which includes medical, dental and prescription benefits--costs him about $420 a month for each employee and family.

Frank B. Brooks, CEO and president of Brooks Sausage Co. Inc. in Kenosha, Wis., also points to the administrative merry-go-round of trying to lower costs by finding the right plan. "Our problem is that insurance companies increase our rates once we join their plan," says Brooks. "So, we're evaluating more plans more often than we'd like."

One cost-savings advantage touted by health care reformers is the creation of purchasing alliances, an expansion of the current multiple-employer welfare arrangements (MEWAs) that let companies join together to buy health insurance for their workers. Ideally, these expanded alliances would help small firms increase their pool of users, reduce premium costs and spread liability--thereby giving them the buying power of larger corporations.

Although the ideal sounds great, will regional purchasing alliances really lower costs? "To the extent that alliances will facilitate cost controls, it is in everyone s best interest," says Guthrie. "There will also be competitive pressures brought to bear because of alliances."

Currently, businesses with fewer than 500 employees pay an average of $3,790 in health care costs per employee, according to the Small Business Administration (SBA). Additionally, the proposed Clinton Plan cap on premiums would be significantly lower than the 9.9% to 13.5% that the average employer now pays.

"But everyone would have to be clean in this for it to work," says Simmons. "Otherwise, we'll be back to another bureaucratic system of greed." He points out that whatever health care reform package ultimately emerges, everyone-including hospitals, doctors, insurance companies, pharmaceutical companies, employers and employees-must sign on to the idea for it to work. * Retain employer tax deduction. The Clinton health reform bill lets employers continue to deduct the cost of health insurance as a business expense until 2004. After that, any benefits in excess of the basic plan would be taxed as employee income. However, the Cooper bill limits employer deductions to the price of the lowest plan in that region, effective immediately; and the Chafee plan would not let employers deduct health care benefits and would require employees to claim the benefits as income.

All BE 100 CEOs polled say that the employer tax deduction for health insurance should remain in place at the current 100% level. "Otherwise, all you would have are temporary employees," says Oscar A. Smith Jr. of Baltimore-based Community Foods Inc. "I support every American having coverage, but we must find a better way to pay for it," he adds.

Tax deductions notwithstanding, "I probably wouldn't make any changes in our plan and [would] continue providing coverage at our current rate, says Frank Brooks, whose company provides 100% health coverage for its 170 employees. Although unable to pass the $3,100 annual cost along to customers, Brooks doesn't see contract leasing--hiring,temporary employees from an agency that pays them and covers their benefits--as a solution. * Quality vs. Cost. Cost issues for small business aside, BE100 CEOs express concern about the quality of health care that Americans, particularly African-Americans, currently receive. While it's widely acknowledged that the United States offers the best--and the costliest-medical care in the world, for most of the CEOs polled, the issue turns back to accessibility and affordability of care, the cornerstones of universal coverage.

Last year's national health care bill totaled an estimated $903 billion. The probable tab this year will be just shy of the $ 1 trillion mark, or 15% of the country's Gross Domestic Product. Many would argue that our costs are so high because we spend money on treating illness, not preventing it.

"People wouldn't be as sick, or show up in emergency rooms too late, if they had coverage," declares Reed of Mid-Delta. She hopes that the final health care plan will be evaluated for the services that need to be offered, and she would like to see input from people of all regions of the country--urban, suburban and rural--to determine what's needed in each area.

"Quality must be the focus," Reed says. "We must demand that providers offer quality care. And we can provide higher quality care at lower costs."

While Brooks supports the concept of an alliance to bring down costs by expanding the pool of those covered, he hopes nothing will limit or interfere with an individual's right to choose among health care providers. Some who think that African-Americans in particular need to be concerned about health care reform. Says Simmons, "Our shortened life span is due to our inability to have access to quality health care."

What also concerns BE100 CEOs and other small-business owners is the life span of their businesses. They don't run mega-conglomerates with thousands of employees over which to spread benefit costs and risks, and they are vulnerable. They don't want health care reform to put them out of business. Still, the majority of small-business owners support the concept of universal coverage. Many are willing to offer some health care benefits; it makes them competitive in the marketplace when looking for workers, and it keeps employees loyal and productive.

"We believe that any plan must include credible and effective measures to control costs,"says BE CFO Ragin."While these measures should be market-based, flexible regulatory approaches must also be considered. We accept that provision of health insurance to employees should be an obligation of employers, although we would argue strongly that the individual employer be given wide latitude to determine what level of employer contribution (whether 80%, 50% or 100%) is appropriate," says Ragin, who oversees the company's 60-40 employer to employee health care plan.

Their support notwithstanding, what these businesses are not willing to risk is the fiscal life and health of their companies. "We can't be everything to everybody," says Simmons, "we don't have enough".