The backlash against managed care

Nation's Business, July, 1998 by Stephen Blakely

The Impact Of Mandates

An analysis done for the Health Benefits Coalition indicates that PARCA's provisions would impose more than 300 new federal mandates on health-insurance plans.

Separate estimates by the Milliman & Robertson actuarial firm conclude that PARCA would raise health-insurance premiums nationwide by an average of 23 percent, with increases--depending on the region--ranging from 7 to 39 percent.

EBRI, the benefits-research group, forecasts that PARCA's ultimate costs would depend on how broadly the courts interpreted any such law, particularly the medical-liability provision.

The Milliman & Robertson estimates are significant because every 1 percent increase in health-care premiums forces 200,000 to 400,000 Americans to lose or give up their health insurance, according to the Congressional Budget Office and the Lewin Group, an economic consulting firm in Fairfax, Va. Based on these estimates, says the Health Benefits Coalition, "PARCA could lead to an additional 5 million to 9 million uninsured."

Swanson of Nurses Available says PARCA's mandates clearly would threaten his ability to continue offering health insurance and the ability of some of his employees to afford coverage. "It means Fin going to have to take a hard look at providing [health insurance] at all, or that my employees may have to drop out," he says.

Robert Stephens, president of Selflock Screw Products Co., Inc., in East Syracuse, N.Y., also has problems with PARCA. His firm manufactures machine parts and offers its 31 employees the choice of an HMO or a traditional--and costlier--fee-for-service health-insurance contract. The company pays 75 percent of the premiums.

For Stephens, being held liable for medical-malpractice suits would force him to reconsider whether he could afford the risk of offering health benefits. He describes PARCA as "a horrible hill" that would have extremely harmful consequences for the people it is intended to help.

"What those politicians don't realize is that for every action, there is a reaction," Stephens says. "We find as the cost goes up, [employees] opt out. We hate to see that happen. We've seen it happen several times: They just can't or won't pay the extra costs, so they'll drop their coverage."

Employers' Responses

The private sector has responded to the health-care legislation on several fronts, by promoting market-based solutions to managed-care problems.

On the political front, businesses of all sizes have been generating strong grassroots opposition to PARCA and similar bills. In February, the Health Benefits Coalition, whose 31 trade and business groups, including the U.S. Chamber of Commerce, represent more than 3 million companies with 100 million employees and family members, announced a national lobbying and advertising campaign against legislation containing new health-care mandates.

Business groups also are pursuing legislative alternatives that would create incentives for companies to expand and improve their health plans.

One is a proposal by Rep. Harris Fawell, R-Ill., that would allow small businesses to band together through trade, church, or business organizations to buy health insurance for their workers and families.