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SMALL BUSINESS LEGISLATIVE COUNCIL STATEMENT TO PRESIDENT'S HEALTH CARE TASK FORCE

 /ADVANCE/ WASHINGTON, March 28 /PRNewswire/ -- Following is the written statement for the record of Gary Frank Petty, Small Business Legislative Council treasurer and director (president and CEO, National Moving and Storage Association), on behalf of the SBLC before the president's Health Care Task Force, March 29, 1993:
 Thank you for the opportunity to appear before the president's Health Care Task Force. We come to the table with great optimism and hope.
 As you know, the Small Business Legislative Council (SBLC) is a permanent, independent coalition of nearly 100 trade and professional associations that share a common commitment to the future of small business. Our members represent the interests of small businesses in such diverse economic sectors as manufacturing, retailing, distribution, professional and technical services, construction, transportation and agriculture.
 I say we are optimistic because if the election of the president sent one signal to us, it is that the country would finally be united in agreeing upon the need for immediate, comprehensive health care reform. For at least two years, we have been preaching the need for comprehensive reform led by meaningful cost containment, and the pews have been almost empty. We are pleased they are now filling up fast.
 Our own education, we believe, mirrors the progress of this debate. In 1987 and 1988, our position on health care was rather simple -- no mandates on employers. In truth, small business understood very little about the health care system. We certainly did not know what outcomes assessment research was, let alone what it could do to improve the quality of health care. Community rating and pre-existing conditions were terms someone else had to worry about. On the other side, hardly any proponents of reform uttered the words "cost control."
 Before the 101st Congress began in 1989, we took a hard look in the mirror. We decided the problem of health care costs had already grown so significantly that we could no longer take the easy way out by complaining about somebody else's solution. We had to do something. We had to become part of the solution, not an obstacle to it.
 We educated ourselves. We toned down the rhetoric of the "no mandates" and began to explore the nature of our small business' concerns. As a result, in 1990 we found ourselves working with Sens. Rockefeller and Pryor during the Pepper Commission's deliberations. While we could not, and still cannot, advocate the adoption of a "play or pay" system for achieving universal access, we found much common ground which we shared with Sens. Rockefeller and Pryor.
 Parenthetically I might note, our relationship with Sen. Rockefeller reflects the positive evolution of this debate. I believe he will not mind my invoking his name to illustrate the progress that has been made. In 1988, in an appearance before the Senate Finance Committee, we were "taken to the wood shed" by Sen. Rockefeller on our "no mandates" views, and we thought the senator was as far away from our views as one could be. But, as I noted above, two years later, we found ourselves in active dialogue with the senator during the deliberations of the Pepper Commission, and frankly I do believe both sides began to absorb what the other was saying. I know we learned from the senator, and we hope he did from us. Now, we expect to look to the senator as one senator who is willing to focus on small business concerns in this debate. We may not always agree on particular legislative initiatives, but we do know we have a "listener" in Sen. Rockefeller and will receive a fair hearing. Of course, I think I need not tell you that we consider Sen. Pryor to be a first class advocate for small business and will always consider him an "honest broker" in the health care debate. The point is, where others see little progress, we see much hope as we all come to a better understanding of what needs to be and what must be done.
 To complete my historical account, by 1991 we had developed our own proposals for health care reform. It was based on the belief comprehensive, not incremental reform, was necessary.
 Until the election of the president, we certainly believed we held what can only be considered a minority view. And this brings me to our proposal. I will not recite the usual litany of why small business is important to this nation and the economy. We believe it is well-documented, and the president displayed his understanding of the small business economy during the campaign.
 We learned during our period of re-examination that several factors were of paramount concern. I was personally responsible for one series of focus group studies conducted for SBLC in Illinois during that period, and what struck me most were the shifting sands among small businesses and their growing command of the nuances of the health care delivery system and their desire for change.
 The question today is "what is the best way to ensure that employees of small business get health coverage?"
 The answer begins and ends with the statement "control costs." We are well aware of the number of Americans employed by small business without health care coverage. The fact, however, must be placed in context. What about the many, many millions of Americans who do receive their health care benefits through a small business employer? In comparison, this latter figure is a rather significant number.
 We are convinced the gap would shrink even further if small employers had the comfort of knowing that the costs of coverage would not become a quagmire from which they could not extricate themselves. Further, we are more concerned about all those currently providing coverage. They have simply run out of options for controlling costs by their own actions; they have changed programs, tried managed care, self-insurance and cost sharing. They have absorbed all the costs they can. Unless we control costs, all is for naught.
 For that reason, we have concluded that in the short term, some form of fee and price controls is necessary to rein in health care provider costs. The truth is we need to separate the health care profession from the health care business. We wish the marketplace would make these adjustments, but we are not so naive to believe free enterprise guarantees the perfect system. Since 1977, SBLC has been an outspoken advocate of antitrust policy, taxation policy (such as the president's investment tax credit) and procurement policy that allow the government to smooth out the market "imperfections," to permit a competitive economy to thrive. In this health care debate, we have come to the conclusion, the government must undertake a role to control costs.
 We think the health care provider community should be asked to defend or oppose a particular cost control approach, rather than the employer community. It is time to recognize the market is not going to produce cost containment by itself.
 I know the subject of using mandates to require small businesses to provide coverage is under consideration. Let me say, it is hard for us to imagine that anyone could warmly embrace the concept of mandatory participation, particularly small business owners, for whom economic freedom, the right to have no one tell them what to do, is one of the primary motivations to become a small business owner.
 Having said that, let me first make two observations and then some suggestions about mandates.
 In our on-going discussions with our members, it is apparent to us that most small businesses have come to view access to health care as almost a fundamental right. It is something they do expect all Americans to have. Second, most small business owners would tell you they believe it is their responsibility to provide it. The barrier, as noted is cost, and the framework for undertaking the responsibility is the freedom to determine how to do it.
 These observations, combined with the recognition we are asking others, such as health care providers to make dramatic changes in their contribution to the system, lead us to the conclusion we cannot summarily rule out any alternative that adversely affects us, if it is part of a comprehensive solution, notwithstanding our reservations. Six years ago, it may have been appropriate. Now is the time to be agents for change, not shackled servants to the past. After all, is it not the nature of the successful entrepreneur to take the risky road to pursue a better tomorrow?
 First, as noted above, cost controls would have to be put in place as a condition precedent. It does get a little tiring to us for others to suggest employers need to do more. We are prepared to make further sacrifices, but not before others in the system have been made to do their fair share. Let's not forget we are currently responsible for providing coverage to many Americans. Before we can ask employers, particularly small business employers, to do more, we must be able to assure them they are not stepping into a cost quagmire that will pull them under.
 Second, any mandatory responsibility would have to be a shared responsibility. The employer and employee must share the responsibility for health care. At best, price and fee controls or global budgeting are short- to mid-term solutions; without getting the individual directly involved in some financial way, we will never impose the long-term discipline necessary to restrain our health care appetite. We believe taxation of the excess cost of benefits to the employee would be an excellent starting point. If there is to be a mandatory participation requirement, it should be borne by both the employer and employee.
 I might note it is difficult for us to imagine the small business employer community would sit still for a requirement that the cost of excessive coverage be borne by the business as a non-deductible expense. In the short-term, you will ignite a firestorm on Capitol Hill of substantial proportions. In the long-term, I believe you will see companies reducing benefits to the level under the specified threshold, but without the qualitative determinations you desire, and would achieve, if the individual participated in the accountability process.
 Third, resolution of the growing problem of workers compensation costs must be part of a comprehensive solution. We are certain cutting workers compensation costs would be a very attractive inducement for accepting any mandatory responsibility.
 A small business moving and storage company in Des Moines, Iowa, has six local drivers making annual salaries in the range of $20,000 to $25,000 each. The company does not provide health insurance for these drivers, primarily because of the high cost of workers compensation insurance. At the state rate of $20 per $100 of payroll, a driver earning $25,000 would cost the company $5,000 a year in workers compensation insurance premiums. On the other hand, that same driver, 30 years old and single, would cost the company $190 per month, or $2,280 per year, for health insurance, if offered by the company. If the company paid both workers compensation insurance and health insurance, the total annual cost would be almost 30 percent of the driver's salary.
 For the six drivers on an annual basis, the company pays about $27,000 for workers compensation, or more than the annual salary of any single driver. Even assuming $250 a month for health care insurance per driver, the company's annual cost would be $18,000. Obviously if the company provided both types of insurance, the annual cost would be equal to the average annual salaries of two drivers, i.e. $27,000 plus $18,000 equals $45,000 divided by two: $22,500.
 We do believe that there would be widespread support in the small business community for reform that "mandates" on the one hand and "cuts costs" on the other. For example, government might mandate that this company pay 50 percent of the health insurance costs for the drivers in exchange for government setting a cap of, say, 50 percent of the current state workers compensation rate, or require the employer to pay the entire premium of at least a basic health care insurance which would include coverage of all workers compensation claims. Too, with some flexibility in these options, the employer could create pay incentives for risk management practices of employees who then would have a vested interest in reducing claims and controlling costs.
 If the task force presents a proposal to the president that is credible on these counts, we believe you will be able to make a strong case to small business that they need to be a part of a comprehensive solution.
 There are several other components of the health care debate I would like to touch upon briefly. The first is the delivery system itself. We have supported the basic concept behind "managed competition." The idea of buying groups appeals to us. What we have not been able to reconcile is a mandatory requirement for small businesses to join such a group. As I indicated earlier, small business owners want to retain the flexibility to choose their approach to assuming this responsibility.
 Associations, for example, have offered one alternative approach for many small businesses to provide health care benefit coverage. Further, we do not think one can rule out self-insurance, in whole or part, if there is a way to ensure its legitimacy under comprehensive reform. We do not know how one reconciles self-insurance options with managed competition, but we are always struck by the number of smaller businesses that do provide meaningful benefits to their employees with some type of self-insurance arrangement. We believe small business will want to retain some flexibility in that regard.
 At this time, we are not sure what role the insurance industry will play in the new world after comprehensive reform. If we build on the current system, some administrative reforms are necessary to reduce the high cost of administering small business programs. We do know that using pre-existing conditions and other underwriting devices to "cherry-pick" the market are not acceptable if we are to have comprehensive reform, universal access and cost control.
 Even if we have mandatory responsibility for coverage, shared by employers and employees, we still have those who are unemployed, are part-time employees, and others who, for one reason or another, do not fall within the employer-based system. As you know, the price tag for universal access is significant.
 How we pay for universal access, even with some mandatory shared responsibility, is rapidly replacing the mandate issue as a major concern. We do not have a specific revenue proposal in mind, but we do believe it must be one that is absorbed by the citizenry as a whole, rather than one that is rolled directly into the costs of health care that must be borne by the employer community.
 There are many other aspects of health care reform I have not touched on in our remarks. For example, we believe reforms of public sector programs, Medicare and Medicaid, are in order. We believe strongly that medical malpractice reforms are necessary. We believe significant cost savings can be achieved by fundamental civil justice reform.
 I am enclosing our most recent policy statement on health care reform. The precise proposal is not as important as our approach to the problem. We view our position as a "work in progress." The central point is that our goal is to achieve comprehensive reform with meaningful cost control, to accomplish it sooner than later and to do so with shared responsibility by all parties.
 Thank you for this opportunity to present our views. We look forward to continuing to work with the president and the task force on this important issue.
 -0- 3/28/93/1900
 /CONTACT: John Satagaj of the Small Business Legislative Council, 202-639-8500/


CO: Small Business Legislative Council ST: District of Columbia IN: HEA SU:

TW -- DC018 -- 0160 03/26/93 16:34 EST
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