A work in progress.

• Author: Barlas, Stephen
• Position: U.S. HEALTH CARE

The health-care reform legislation snaking its way through Congress is not nearly as venomous as some in the corporate community initially worried it would be. In truth, it is not close to being "transformative," in the sense that it makes major changes in the way health care is delivered and how costs are controlled. So existing corporate health insurance programs will stay in place, as is, for the most part, which is the good news, so it seems--for now.

[ILLUSTRATION OMITTED]

But the bill might bite some small businesses. There is likely to be a requirement that businesses over a certain threshold size either provide insurance, or that all individuals whose companies don't provide insurance purchase a policy--like automobile insurance is required--from state-based cooperatives, where private insurers will compete for these estimated 46 million new "customers," said to be the uninsured.

In the latter instance, companies would subsidize the costs of some employees' premiums. If a threshold is set for required company coverage, it will be above $500,000 a year in payroll, and probably higher. The House's Affordable Health Choices Act, for example, requires employers above $500,000 that do not provide insurance to pay an 8 percent payroll tax.

These taxes would help fund the subsidies for employees and the unemployed who go to nonprofit state insurance cooperatives or health insurance exchanges to purchase individual policies.

If private plans offered in the states have to vie for this new lollapalooza of a market with a federal government plan(s), referred to as a "public option,"--where the federal government creates a government-run insurance option to compete with private plans in efforts to drive down costs to consumers--private insurers may end up shifting some of their costs to private employers.

Yet some believe low, government-negotiated reimbursements will harm rural health-care providers and physicians would make up the gap in revenue by trying to negotiate higher reimbursements from private employers buying coverage from private plans.

As company premiums rise, younger, healthy employees could defect from reasonably good corporate plans to cheaper "public" plans. That loss would be a double whammy on corporate costs.

The U.S. Chamber of Commerce Senior Manager of Health Policy James P. Gelfand explains: "We especially don't want younger, healthier employees to leave because that raises costs for everyone in the employer plan, and eventually you get to a death spiral and the plan ends."

The big concern for employers--especially large companies that already provide good health benefits--is that insurers will take a loss on policies extended to the formerly uninsured and then try to make up that lost revenue by increasing premiums for employers. Following closely in second place is a concern that companies and their employees, either directly or indirectly, will have to pay the lion's share of the $1 trillion bill that will come due after 10 years of coverage of the nearly 46 million so-called uninsured.

[ILLUSTRATION OMITTED]

Who to Tax

In terms of the 10-year costs and the revenue-raising options, the House bill has been much more problematic. The Congressional Budget Office estimated that the House plan could raise the U.S. deficit by $239 billion, which raised the ire of the 52 so-called "Blue Dog Democrats," relative conservatives who initially blocked the House Energy and Commerce Committee from passing the bill that its chairman, Rep. Henry Waxman (D-Calif.), had labored over for months.

The House had planned to finance the $1 trillion-plus expense by taxing high-income individuals, which would have brought in about $550 billion. The rest of the $1 trillion total would come from cuts to the Medicare and Medicaid programs.

The tax increases honchoed by Ways and Means Chairman Rep. Charles Rangel (D-N.Y.) would have made married couples making $350,000 subject to a 1 percent income surtax. The levy would rise to 2 percent for those making above $500,000 and 3 percent for those with incomes of $1 million or more. If those surtaxes stay in a final bill, which is likely, the starting...