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CEOs: Health Reform Won't Buy Relief


By Alex Nussbaum

(Bloomberg) — President Barack Obama's $1 trillion health-care overhaul won't buy corporate America relief from medical costs that more than doubled in the last decade, chief executive officers of more than a dozen U.S. companies said.

Private companies, providers of benefits to 132 million Americans, will see little savings from legislation under debate in Congress, CEOs at United Parcel Service Inc. (UPS), Safeway Inc. (SWY) and Verizon Communications Inc. (VZ) said in interviews over the past two weeks. The measures are more likely to add expenses, through taxes and fees on employers who don't offer affordable coverage, said Ellen Kullman, chief of Wilmington, Delaware-based DuPont Co. (DD), the world's third-largest chemical maker.

"They're disasters," said John Riccitiello, CEO of Electronic Arts Inc. (ERTS), of Redwood City, California, the second- largest video-game maker with 8,000 employees. "What part of either the House or Senate bill is going to do anything with cost? I don't see anything."

U.S. companies spent $400 billion on employee health care in 2007, a fivefold increase over two decades, according to the Employee Benefit Research Institute in Washington, D.C. At its present rate, the number will near $830 billion by 2017.

30 Million PeopleThe legislation, the biggest proposed change to U.S. health care in a half-century, will expand coverage to more than 30 million people, according to the Congressional Budget Office. What it won't do is fundamentally alter a system in which medical costs routinely outpace inflation, hurting U.S. competitiveness, said Scott Davis, CEO at UPS, the world's largest package shipper with 340,000 U.S. workers.

"Cost control ought to be at the base of any health-care reform, and I'm not sure it's there," Davis said in an interview from his Atlanta headquarters. "We need to talk about wellness. There's not enough talk" about prevention.

The Senate is debating a 10-year, $848 billion measure. The House approved a $1 trillion version last month. The bills require all Americans to get insurance, create online "exchanges" where consumers can comparison shop and subsidize those who need help buying a policy.

The House would also create a government-run plan to compete with private insurers, while the Senate may expand the Medicare program to people 55 and older.

"Reining in health-care costs is a top priority for the president, and we're optimistic that the Senate will continue to strengthen the bill's cost-containment provisions," said Reid Cherlin, a White House spokesman, in an e-mailed statement.

'Real Promise'Cherlin cited a Nov. 12 report by the Business Roundtable, an association of 161 U.S. chief executives, that found the Senate legislation offered "real promise" to reduce the growth in medical spending.

The Senate bill would shave 1 percentage point from annual increases in expenditures by the top two U.S.-backed health health programs, and may trim gains in private spending that much as well, the White House Council of Economic Advisers said in a report released today.

Brian Roberts, chief of Philadelphia-based Comcast Corp. (CMCSA), the largest U.S. cable-TV company, said the Senate plan offers "a workable framework" to make health care more affordable, in a letter to Obama released by the company on Dec. 3.

While Comcast offers coverage to its 100,000 workers, "there are millions of Americans who simply cannot afford to get sick, as health coverage gets increasingly difficult to secure, and the resultant demands placed on federal and state budgets are enormous," Roberts said in the letter.

'Critically Needed'"We cannot allow perfection to stand in the way of critically needed and very good legislation," he said.

The Senate bill takes steps toward injecting the kind of competition and transparency missing in U.S. health care, said Steven Burd, CEO at Safeway, the nation's third-largest grocery chain.

The Pleasanton, California-based company has saved $150 million over the last four years and kept per-worker costs flat for its 200,000 employees, Burd said. That's come from steps such as discounting premiums for those who improve their health and providing more information about which doctors offer the best rates, he said.

The Senate legislation would give companies more freedom to do both, though neither provision goes far enough, Burd said in a telephone interview. Their benefit would be outweighed by new taxes and cuts to Medicare reimbursements that will shift more costs to the private sector, he said.

'Strengthen Transparency'"What's currently on the table isn't good enough, but I expect it to get better," said the chief executive, who has traveled to Washington 11 times this year to lobby on health care. "I wouldn't like to see what's in there today passed, but I know people are going to try to strengthen transparency. I know people are going to try to eliminate some of this cost shift."

The cost for employers to insure a family of four topped $13,000 this year, a 131 percent jump over the past decade, according to the Henry J. Kaiser Family Foundation, a Menlo Park, California-based nonprofit group. Health costs rose four times faster than the U.S. inflation rate, the group found.

Obama, in a speech to Congress Sept. 9, said he wanted to "slow the growth of health-care costs for our families, our businesses and our government." Yet a Nov. 30 analysis from the Congressional Budget Office found the Senate measure will have little impact on worker premiums for large employers by 2016, two years after the law would take effect.

'Really Disappointed'The year-long debate has been a missed opportunity, said Riccitiello, of Electronic Arts, publisher of "The Sims" and "Madden NFL" games. The legislation, crafted mostly by Democrats, has left him "really disappointed."

Riccitiello questioned why Congress didn't tackle smaller changes individually, such as protections for doctors against malpractice lawsuits.

"These could have gotten done in three months," he said.

UPS is worried it will lose as small businesses put off hiring and restocking inventory while they wait to see how the bills affect them, said Davis, the CEO. Lawmakers are debating whether to require employers to provide insurance to workers, and how much to penalize those that don't.

"We have 2 million small-business customers out here who aren't sure what impact that's going to have on them," Davis said. "Policy uncertainty is one of those things I fear right now. They need to resolve it."

Employee BenefitsUPS will spend more than $3 billion on health care in 2009, said Norman Black, a spokesman, in an e-mail. The company offers benefits to all employees. Part-timers, who make up half its workforce, must wait a year to qualify.

Far from cutting costs for business, the employer mandate will raise them, said DuPont's Kullman. So, too, will a tax on high-end "Cadillac" health plans in the Senate's version, she said in an interview.

"We are a big believer in reform, but we're not sure we see as much reform in there," she said of the legislation.

The government-run plan favored by House Democrats "would not be acceptable," Verizon chief Ivan Seidenberg said in an Oct. 28 news conference arranged by the Business Roundtable, the Washington-based group of CEOs. The plan will underpay doctors, forcing them to raise costs on private-sector clients, he said.

Health-care spending topped a list of CEO concerns in a survey released Dec. 8 by the group. That "underscores the urgent need for the right kind of health-care reform," Seidenberg said in a statement. "Without reform, these costs will continue to weigh down the economy."

Verizon is the largest mobile-phone company in the U.S. Based in New York, it had 230,000 workers as of Sept 30.

$10 Billion FundThe legislation isn't a complete loss for employers, said Paul Fronstin, a senior research associate at the Employee Benefit Research Institute. Lawmakers have proposed a $10 billion fund to absorb some costs for insuring retirees.

Taxes on insurers, drugmakers and medical-device companies will be passed on to employers initially, he said. While they may help in the long run, by forcing the health industry to be more efficient, that may take years, Fronstin said.

The overhaul could lead to a revolution in health benefits, allowing companies to drop coverage altogether and let workers buy through the exchanges, he said. That could be a boon for automakers and airlines, industries where insurance costs have helped put companies "in critical condition."

"If your goal is to maintain the benefit plan you're offering today, as a large employer, there's not a lot to help you," Fronstin said. "If that's not your goal, you could argue these bills do help you, because they provide an alternative to the employer-based system."


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