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A small company: your personal responsibility.

Health, Care Cost Per Employee: $1,450

What would health-care reform, Clinton-style, mean for Sun Automotive Group? The group -- four new-car dealerships, two used-car lots and a body shop -- grosses over $100 million annually and employs about 235 full-time employees. We now pay about $215,000 annually for our health-care costs. Under the Clinton plan, our projected costs would rise to about $330,000 -- an increase of 53 percent. To cover those costs, we'd have to generate an additional $3 million in sales. And this cost increase assumes that premiums under the Clinton plan wouldn't exceed our current costs, which is very unlikely.

Although that's a daunting prospect, one part of the Clinton plan -- purchasing alliances -- does have a familiar ring. In a sense, we're already using a purchasing group, since our trade association, the Arizona Automobile Dealers Association, provides our health-care insurance. AADA and our insurance carrier have 22 employees dedicated to the local plan. They handle almost all of the plan administration, so our two payroll clerks devote only a few hours each week to group health issues.

Our company offers a fixed contribution to the plan's health-insurance premiums, and the employee simply pays the difference. Typically, employees pay $45 per month for individual coverage, plus an additional $160 per month for family coverage under the preferred-provider organization plan or $150 under the health maintenance organization plan. Fifty-nine percent of our employees are in the HMO plan. If employees want a more expensive plan with additional options, they pay more, and if they can accept the limitations of managed care, they pay less. But we do cushion the cost by offering the coverage within a cafeteria plan, which discounts the employee's burden by at least 28 percent.

Surgery and other in-patient admission costs have been the largest expenses in AADA's group health plan, but managed care and second opinions have helped to cut our costs in this area by about one-third. We also deliver psychiatric care, substance-abuse counseling and prescription drugs in a managed-care setting.

We don't offer our retirees health benefits, and we don't plan to change that policy. We provide them with 401 (k) plans and cafeteria plans to meet their financial goals, but we encourage our employees to plan for themselves and to assume responsibility for their future needs.

Our HMO offers a good deal of preventive care -- annual examinations, mammograms and blood pressure and cholesterol checkups -- and we're lobbying for more of that in the PPOs, too. Some companies in our area have penalized employees for high-risk habits by charging more for health insurance. Other employers have tried a more subtle approach by giving health-insurance discounts to employees with good health habits. The discount approach seems more palatable and would likely be our choice if we decided to change policies.

Looking down the road a bit, I think the grand Clinton plan won't pass muster, because Congress, Wall Street and Main Street America are unlikely to accept such radical additions to the welfare state. We'll probably have some kind of health-care reform this year, if only because of upcoming congressional elections. But it won't be an overhaul. Instead, we'll get more governmental fine-tuning, such as changes to pre-existing-conditions requirements or community-rating requirements.

The administration won't get true universal coverage because it would have to mandate contributions, and that would impose onerous limitations on personal freedom and inflict serious economic damage on most employers. We might see higher taxes on tobacco, which may fund an expansion or reform of Medicaid for the chronically uninsured. If so, the administration will trumpet this expansion as satisfying the central tenet of universal coverage.

Unfortunately, many of the reforms under consideration don't solve the root cause of the explosion in health-care costs: the fact that the employee is insulated from high medical costs. Shielding employees from the real costs of their health-care decisions will only exacerbate existing problems or lead to unacceptable rationing of care.

To remedy this situation, we need some kind of incentive program to further involve employees in choosing their health-care provider, procedures and other services. If employees have substantial, personal financial incentives to save money, they become the best members of the cost-cutting team. For example, cosmetic surgery and other usually uninsured medical procedures haven't seen much inflation. When people know they aren't going to be covered for something, they're much more interested in shopping around for the best prices.

That's why we should actually encourage insurance that focuses on individual choices, instead of using employers as the vehicle for health-care reform. Why not provide a "built-in" cafeteria plan by giving all individual taxpayers a deduction above their adjusted gross income for health-insurance premiums, and deduct premiums from their FICA base as well?

Plus, we should encourage the development of medical insurance akin to universal life insurance. Under such a policy, the premiums paid in would build cash value, which the individual could use for medical expenses. This would also encourage people to manage their medical expenses better, since the longer the cash value remains untouched, the more money the policy accumulates. And losing a job or changing careers would no longer mean losing insurance coverage, because the individual would own the insurance.

There's no logical reason for employers to be involved with their employees' health care, any more than employers should pay for their home or automobile insurance. Employer-funded health insurance began as a response to a government policy gone awry -- price and wage controls in the 1940s. Personal responsibility is key to reforming this system, but the Clinton plan would take us in the opposite direction.

by Craig C. Lindsay CFO Sun Automotive Group, Scottsdale, Ariz.
COPYRIGHT 1994 Financial Executives International
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1994, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:Employee Benefits
Author:Lindsay, Craig C.
Publication:Financial Executive
Date:Jul 1, 1994
Words:943
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