2009-11-05 / Local & State

Large Employers At Pa. Forum Wary Of Public Option

By Jane M. Von Bergen THE PHILADELPHIA INQUIRER

PHILADELPHIA (AP) – Insurance companies are uniformly opposed to the government insurance public option, but they are not the only ones lining up against what has become a lightning rod in the debate around the health care overhaul in Washington.

The insurers are being joined by the nation’s largest employers, companies such as Wal-Mart Stores Inc. and Verizon Communications Inc.

“We’re worried that a lot of good risk will leave our plan if they are allowed to opt out,’’ she said, referring to younger, healthier people who cost less to insure. “We are concerned they’ll find the public option more attractive.’’

All that talk of risk has Dineen sounding as if she works for an insurance company instead of a science and technology company.

No wonder. The majority of large employers, whether they manufacture chemicals, cars or potato chips, self-insure their employees.

In this health care debate, the national spotlight has been on insurers. But, according to the Employee Benefits Research Institute, the majority of employees in the United States, about 73 million, actually get health coverage from their employers, not through insurers such as Cigna Corp., Aetna Inc. and Independence Blue Cross.

Nearly 9 out of 10 workers in firms with 5,000 or more employees get health coverage this way.

Self-insure: That means that instead of buying health insurance policies for their employees, employers are assuming the risks themselves and paying employee medical bills. Since organizations that self-insure can also design plans that suit their budgets or other objectives, this approach generally saves money despite the additional risk the employer assumes.

Even when an organization self-insures, employers rely on outside insurers to develop doctor and hospital networks, negotiate rates, process claims and provide insurance against catastrophic expenses. Because employees still get insurance cards from the outside insurer that processes the claims, employees may not realize that their employers self-insure.

It is no surprise that employers acting like insurers would also think like them. And like insurance companies, they, too, worry that the public option will not only draw younger and healthier subscribers away from their plans, but will also boost costs to cover those that are left.

Even though some large organizations may act like insurers, there are some regulations that affect the insurance business that do not affect them – and large employers would like to keep it that way. These include administrative provisions about when an employee can be denied coverage, or what services must be covered.

As Washington lawmakers try to craft compromise legislation, large employers are lobbying for the status quo. At the same time, activists plan continued rallies.

“If the businesses think the public option is going to hurt them, they are not thinking about their own long-term interests,’’ said protest organizer Marc Stier, the Pennsylvania director for Health Care for America Now, a group that backs President Barack Obama’s proposals.

There are a number of wrinkles in the various plans that have businesses that self-insure worried.

Businesses worry that the government public option plan will pay doctors and hospitals the same fees it pays for Medicare, another government program. Doctors complain those government reimbursements are too low to cover costs. Organizations that self-insure believe, as insurers do, that doctors and hospitals will charge them more to make up for Medicare shortfalls.

If that happens, businesses say, they will have to pay more and they will probably pass on more costs to employees. If they do, employees _ especially the younger, healthier ones _ may try to switch to cheaper, less comprehensive government plans as premium shares and copays rise. That will leave older workers with more health problems in employer plans, raising costs.

“It’s called adverse selection, where all the healthy folks will leave us to go to the least expensive provider,’’ raising the peremployee cost for those that remain, explained Walter G. Kanhofer, director of employee benefits for Main Line Health System. Headquartered in Bryn Mawr, less than ten miles northwest of downtown Philadelphia, the suburban hospital and doctor system self-insures 16,000 people, about 8,000 employees and their family members.

One proposed amendment would require employers to pay the government a fee equal to the insurance premium for every employee who opts out. “Our costs may go up instead of down,’’ Kanhofer said at a forum that took place in Philadelphia on Wednesday, Oct. 21. The event was sponsored by the Penjerdel Employee Benefits and Compensation Association.

National employers such as Dow Chemical Co. and Wal-Mart worry that they will have to follow state mandates, instead of offering one national plan.

“The more the administrative burdens are, the more costly it becomes,’’ said Martin Reiser, a lobbyist with Xerox Corp. who heads the newly formed business group, National Coalition on Benefits.

The result, some say, would prompt employers to stop providing health coverage.

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