One of the better arguments for health care reform is that the cost of providing health coverage to employees puts U.S. industry at a competitive disadvantage internationally. Testifying March 31 before the Senate Committee on Health, Education, Labor, and Pensions, health and human services nominee Kathleen Sibelius made just that argument. Quoting a participant in an Obama transition town hall meeting, she said, "How can you go out on a limb and start a new business when health care is a noose around your neck?" General Motors, she pointed out, "spends more on health care than steel." Older industries, she said,
are striving to maintain both coverage and competitiveness—locally and globally. New industries and businesses are struggling to offer coverage in the first place. Both workers and their employers are concerned about the future of employer-sponsored health insurance. Currently, there's no relief in sight.
Yet the Obama plan threatens to increase rather than decrease the economic burden imposed on U.S. industry by employer-based health insurance. That's because it will require large employers that contribute insufficient funds to employee health coverage to devote a certain percentage of their payroll for that purpose. Either they can establish or expand their own health insurance plans, or they can help pay for health coverage through the National Health Insurance Exchange, a new marketplace in which federally regulated health insurance plans—including one created and maintained by the feds themselves—would compete to serve individuals and small businesses. The so-called "public option" government plan is stirring lots of controversy, and it remains unclear how firmly Congress and the Obama administration will back it. But if Democrats want to compromise on some element of their plan, they'd do far better to make good on their "competitiveness" argument and free business from any requirement to pay for health insurance. According to the New York Times' Robert Pear, the Democratic chairmen of five congressional committees poised to shepherd health care reform through the House and Senate all agree that employers "should be required to help pay for it." Instead, they should pay for health care reform out of general revenues.
The policy reasons for doing this are obvious. You don't relieve health care's burden on American industry by imposing a new pay-or-play requirement. Even if health care reform manages to curb medical inflation, pay-or-play could easily weigh down the private sector with health-related costs even higher than those that weigh it down today. Eliminate pay-or-play and you virtually guarantee the private sector's health care costs will decrease, because many companies will see the establishment of the National Health Insurance Exchange as an opportunity to eliminate health coverage altogether. Nothing wrong with that, so long as the policies available through the exchange provide decent coverage at low prices, as promised.
The mainstream political mantra of health care reform is that Americans like employer-based health care and reform should build on it. But with employers already slashing away at health care coverage, that's a pretty wobbly foundation. I don't think voters would necessarily blame Obama should health care reform accelerate this trend. The president could be clear that he still expects responsible, civic-minded companies to provide their employees with health insurance while also stating that it has never been the government's job to force them to do so. The obvious political upside to not making business pay for health care reform is that it would drive a very useful wedge between the health insurance industry, which stands to benefit from pay-or-play, and every other industry, which stands to suffer from it. In exchange for this get-out-of-jail-free card, Democrats could require the business community to throw its support behind the public option. Apart from the hysterical fear that government health insurance constitutes socialism, American business has no real reason to oppose its expansion and has everything to gain from it. If industry fell behind the public option, the GOP would have to follow, or at least keep its mouth shut.