Employers uneasy about reform

August 1, 2009

Sensitive to market pressures, 67% of employers prefer a phased approach to reform and 68% believe the current tax treatment of coverage should not be changed

Based on past surveys, Linda Havlin, a Mercer worldwide partner says she assumed that employer opinions would not have changed much in recent months. But, one thing that prior surveys had not been able to probe was how employers were reacting to cost estimates published by the Congressional Budget Office (CBO). A price tag well in excess of $1 trillion combined with inadequate revenue to cover that cost and an unimpressive reduction in the uninsured population was certain to raise concerns among employers.

"Add to the mix that employers are still struggling to emerge from recession. They face stringent cost controls, including lay-offs and budget cuts," Havlin says. "Their responses to our survey indicate that they want Congress to prove these cost saving ideas will reduce trend before increasing federal spending.

Only 11% favored implementing comprehensive reform.

"Further, when we asked who should be eligible to enroll in a public plan, there was no clear consensus as to whether it should be open to individuals, small employers and/or all employers," Havlin says. "They are concerned that the plan would erode, not enable competition. Private health plans, including non-profit plans, would be forced to take drastic action to compete on price, which could produce some substantial innovations, but the public plan would always have a cost advantage."

A POSITIVE NOTE

On the positive side, Havlin predicts that there are other elements of reform that could drive improved quality and cost. More competition in the individual and small employer market will stimulate innovation, as will improved disclosure of outcomes.

One risk that concerns her is the potential that providers could get discouraged by cost pressures and drop out of networks. "I'm surprised, frankly, that there hasn't been more concern about the risk that some providers may reduce the number of government program patients they take. Employers are sensitive to those uncertainties," she says.