The most important difference, according to small-business lobbyists, is that the Democratic version would allow patients to sue their employers for denial of necessary treatments.
Small-business advocates and some lawmakers see suits against employers leaving companies exposed to unlimited liability -- something they predict would see many businesses drop insurance coverage altogether. Sponsors of the Democratic version of the bill, as well as doctors and trial lawyers, say the provision is needed to protect patients from employers who deny necessary but expensive treatments.
On June 26, the Senate voted down an amendment that would have immunized employers from such lawsuits. Another amendment to limit employer liability, which President Bush sees as vital, is in the works. By June 29, as the patients-rights bill edged toward approval amid further Senate debate over a final round of amendments, the bill still faced an uncertain future. Bush has threatened to veto any measure he thinks might spark a wave of litigation, and it is not clear if amendments to the bill can satisfy his concerns.
Although it remains unclear what shape the employer-liability provision will take in the final law, health-policy analysts believe few small companies will be affected. So why the outcry from small-business groups? Paul Fronstin, economist and senior research associate at the non-profit Employee Benefits Research Institute, discusses the issue in this edited interview with BusinessWeek Online's Theresa Forsman.
Q. Can you clarify who would be vulnerable in these employee lawsuits?
A. It's the self-insured companies who make medical decisions and thus are open to suits. Virtually all self-insured companies are large corporations. It doesn't apply to most small businesses.
Q. Why are small businesses worried about it, then?
A. Uncertainty is really driving this -- employer uncertainty about what may come out of this. We've learned from our surveys of small businesses, they have a lot of misperceptions about how some policies work. Most don't know, for example, that more than half of what they spend on their employee health benefits is tax deductible. They hear "employers can be sued" and don't know it doesn't affect them. If they are under the impression they can be sued, they're just going to drop coverage.
Q. How can they drop coverage? In a recent research paper, you said that to be competitive in a tight labor market, more small businesses -- 67% in 2000 compared to 54% in 1998 -- were offering health insurance even though premiums have been rising.
A. I believe it all depends what happens with the economy. In a strong economy with a tight labor market, they had to offer coverage.
Q. And there's not so much pressure now?
A. The timing of the legislation and what happens with the economy will affect the number of employers who offer health insurance. Open enrollment [for employer-sponsored health-insurance plans] takes place in the fall, but employers are planning today for changes in 2002. So today, they have to come up with two plans. Plan A is what they roll out if we have a soft economy. Plan B is what they roll out if we have a better economy. For a large firm, Plan A would shift more cost and responsibility to employees. At small firms, Plan A could be: We drop health benefits.
Q. Weak economy or not, the Congressional Budget Office has estimated that the provisions in either of the Senate bills, as they were written in mid-June, would add less than 4% to the average health-insurance premium. Given the double-digit premium increases that some companies have absorbed in years past, is that so catastrophic?
A. Many people may not know the cost projections or may not believe them. Not many people are that well-informed about what form this would take, or what impact it would have on them. They will feel the need to respond to this bill by changing benefits.
Q. Do you think the vulnerability of some large employers to patient lawsuits would lead to more support for the notion of unlinking health insurance and employment in this country?
A. There are a lot of issues on that. Right now...there's no individual market for people to go to. In the current system, employers don't see a viable alternative to providing it and they have an interest in providing it. It's not just being competitive in recruitment and retention, but it's an investment in employees that affects their health status and, ultimately, productivity.