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CEOs Secretly Want Health-Care Reform


Some top executives are so fed up with the status quo that they wouldn't mind government intervention

Congressional leaders say they'll have a health-care bill in June that will deal with the uninsured. Fine, says business, as long as the existing employer-based insurance system is maintained. That seems counterintuitive, given that health care is the fastest-growing cost for U.S. companies. "I've worked in the employer-based market for 35 years, and it's bizarre that CEOs continue to support this system," says Robert Laszewski, president of consultants Health Policy & Strategy Associates.

But perhaps they really don't. Health reform experts say many CEOs would secretly love the federal government to take on the burden--and some don't bother to hide it. "There are employers that don't want the responsibility, and we are in that category," says Carl T. Camden, CEO of Kelly Services (KELYA). Managing insurance for his vast, geographically dispersed workforce of temporary workers is horrendously expensive, he complains: "My health-care costs total more than my profits."

Insurance premiums charged to employers have soared 119% over the past decade, four times faster than wage increases. Based on a survey of 428 companies, Mercer, the consulting division of Marsh & McLennan (MMC), estimates that 46% of employers plan to shift more health costs to employees in 2010.

Neverthless, CEOs tend to insist they want to keep offering benefits for two reasons. They're a valuable employee perk, as the Business Roundtable and other corporate groups point out. Further, top executives figure they would pay for health care anyway if the government took control, through higher taxes or fees, while losing the ability to hold down costs.

But in private, "CEOs overwhelmingly want out of this business," says Benjamin Sasse, an Assistant Secretary of Health & Human Services under President George W. Bush who's now an assistant professor at the University of Texas at Austin. "They just do not want to be seen as more willing to dump [benefits] than their competitors are." Sasse says many CEOs he has talked with would even pay a new tax if it got them out of the insurance business.

"STATEROOM ON THE TITANIC"

Companies first started offering health benefits during World War II's tight job market. Wage controls were in effect, so health coverage took the place of raises as a recruitment and retention tool. Sixty years later, that benefit has become entrenched.

Plenty of CEOs continue to support the status quo, of course, despite the drawbacks. "A lot of businesses take the approach that 'this is a lousy system, but we're good at it,' " says Joseph J. Minarik, research director for the Committee for Economic Development, a Washington think tank. "I interpret this as, 'I've got the best stateroom on the Titanic, and I'm not moving.' "

Democratic senators are calling for a new, federally funded insurer that would expand coverage by competing with private health insurers. Although insurance companies hate the idea, opposition from other businesses has been muted, even though this "public option" is characterized by Republican lawmakers as the first step toward a government-run system. "CEOs are focused on the bottom line," says Len Nichols, director of health policy at the New America Foundation, another think tank. "They know high health-care costs put U.S. companies at a competitive disadvantage."

James Hagedorn, CEO of Scotts Miracle-Gro (SMG), describes himself as a conservative. Nevertheless, he sees much to like in the national health systems of Europe. "If someone said to me, 'you can pay the same amount [for health care] and we will redeploy to a national system,' I'm fine," he says. "Why would I argue with that?"

Arnst is a senior writer for BusinessWeek based in New York.

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