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PHOTOCOPY
PRESERVATION
Shared Responsibility
Shared Responsibility: The American Way
Shared responsibility is the American way -- part of the American tradition of work and reward.
Nine out of ten Americans with private insurance already get it through their workplace. Real
health care reform will continue this tradition, building on the existing system and expanding it
to include all Americans.
And shared responsibility will lower costs for businesses that already insure their workers. Small
businesses benefit most. And studies reveal that real reform will not slow the economy, and may
even create jobs.
This health care reform debate is coming down to a choice between two approaches. One builds
on our American system of workplace health benefits, and makes sure employers live up to their
responsibilities. The other approach encourages employers to drop our health care coverage. For
middle class Americans, its an obvious choice.
The American people overwhelmingly support Universal Coverage: 78% according to a recent
ABC News/Washington Post Poll [June 27, 1994]. And shared responsibility is the fairest, most
economical, and least disruptive way to get there.
I.
WITHOUT SHARED RESPONSIBILITY, COST SHIFTING WILL
PUNISH RESPONSIBLE BUSINESSES
There is often cost-shifting among firms in the same industry, "creating a situation where some
employers may actually subsidize health care provided to employees in competing firms. [National
Association of Manufacturers, "Employer Shifting Expenditures," prepared by Lewin ICF, December 1991]
The current system forces responsible employers to pay for insurance three times: First, for their
employees. Second, for dependents of their employees who work, but don't get health care from
their own jobs. And third, for the uninsured -- many of them working people -- who show up in
America's emergency rooms, and whose unpaid costs are added to the bills of those who do have
insurance. Cost shifting is a hidden tax on responsibility and on employment.
In 1991, employers who
took responsibility for
Hidden Tax On America's Business:
employees and their
families paid $26.5 billion
Responsible Businesses Pay 3 Ways
to cover dependents whose
employers did not offer
insurance to their
Cost For Uninsured
$200
workers. [National Association of
Cost For Working
Manufacturers, "Employer Cost-Shifting
Dependents
Expenditures,' prepared by Lewin-ICF,
December 1991]
$150
That same year, employers
$100
Cost For Own Workers
$134 Billion
who took responsibility for
their employees' insurance
also had an additional $10.8
$50
billion added to their
premiums to cover the
$0
uncompensated hospital
Source: "National Association of Manufacturers, "Employer Cost-Shifting Expenditures," prepared by Lewin-ICF, December 1991
costs of families without
any insurance. Nearly half of this was to pay for "workers, or dependents of workers, in
firms that didn't provide coverage." [National Association of Manufacturers, "Employer Cost-Shifting
Expenditures," prepared by Lewin-ICF, December 1991]
The manufacturing industry -- a critical source of high-wage jobs and export-quality
American goods has been hard hit by cost shifting. America's manufacturers are among the
nation's most responsible sector, covering almost all of their workers. They must compete
against foreign manufacturers with a stable, insured, productive workforce, while carrying the
extra burden of companies that do not provide coverage.
Bethlehem Steel has 20,000 employees but pays insurance for 160,000 people. Although
locked into a competitive battle with Canadian steel producers just across the border,
Bethlehem is burdened by $65 million in additional health care costs -- almost a third of
their total health care bill -- because of cost-shifting. [Testimony of B. Boyleston, V.P. for Human Resources,
before Congressional Steel Caucus, 6/23/94]
One study estimates that 28% -- or $11.5 billion -- of the health care costs paid by
manufacturing companies are a result of cost-shifting. [National Association of Manufacturers,
"Employer Cost-Shifting Expenditures," prepared by Lewin-ICF, December 1991]
Most of Manufacturing Cost Shift Is
From Workers In Other Firms
Health Costs of Manufacturers
Components Of Cost Shift
35
30
Workers
25
$7.2
20
Billion
15
10
$11.5
Billion
5
Shifted
Non-Workers
Costs
0
Sources: Lewin VHI for The National Association of Manufacturers
Universal coverage will eliminate the penalty on businesses that provide coverage.
"Universal coverage would mean that those firms that now offer insurance would no longer
need to pay indirectly through higher doctor and hospital bills for the care given to
uninsured workers and their families. On the other hand, firms that do not now provide
insurance could no longer ride free." [CBO, 2/94]
II. AVOIDING SHARED RESPONSIBILITY MEANS MORE
WORKERS WILL LOSE THEIR COVERAGE
"For those who have suggested that the best policy may be to muddle through with only small,
incremental changes, our analysis suggests that the number of uninsured workers in small
businesses will continue to grow. If our survey proves true, in the years ahead 30 percent of
small businesses currently providing insurance will drop their insurance coverage because of
the high cost." [Health Affairs. Spring 1992]
Under one proposed plan, where benefits were not guaranteed at work, two million workers
in small businesses would lose their employer's contribution. [CBO, 2/94]
Another reform alternative would cost 1.3 million Americans their insurance every month.
And 1.8 million Americans a month would lose their coverage under yet another leading
alternative. [Lewin-VHI estimates for Families USA]
If employers are allowed to dodge responsibility every worker in the United States will be at
risk of having to bear the entire burden of health insurance alone -- $3900 or more each year.
More and more, employees are being hurt as rising costs force companies that take
responsibility to cut back.
The percentage of
workers whose
ewer Employees Receive Health Benefits At
employers sponsor
ork, While More Individuals Rely On Public
health insurance plan
ssistance Or Go Without Insurance
is already falling --
Millions
from 81% in 1988 to
250
78% in 1992. In
200
1978, 23% of new
46
52
150
companies offered
health benefits to their
100
employees. In 1992,
50
that percentage had
0
1989
1992
dropped to 15%.
[Department of Labor, 5/94;
Health Benefits
Other
AtWork
Insurance
No Insurance
University of North Carolina,
Source: Non-Elderly Population: EBRI. Based on March 1993 CPS, 1/94.
8/92]
Nearly six in ten Americans earning between $30,000 and $50,000 a year have experienced
health benefit cutbacks in their households. The percentage of families with full employer-
paid coverage fell from 32% in 1988 to 19% in 1992. [New York Times/CBS News Poll 4/7/93; Hay/Huggins
Benefit Report, 1992]
Steve Burd, President
and Chief Executive
Percentage of Families With
Officer of Safeway
Full Employer-Paid Coverage
Inc. -- one of the
world's largest food
retailers -- said his
35%
company competes
"with some very large
30%
companies that don't
25%
offer the same kind of
coverage." If health
20%
reform doesn't pass
15%
with the employer
mandate, Burd fears
10%
that Safeway might be
5%
forced to curtail its
coverage "to level the
0%
playing field." [LA Times
Source: Hay/Huggins Benefit Report, 1992.
Friday July 22, 1994]
Some voluntary systems end up creating welfare-like incentives for irresponsible behavior.
One proposed plan would cause employers that take responsibility for their workers to bear even
greater costs. Employers are encouraged to shove their employees out of the system, where
taxpayer-funded subsidies will help workers buy coverage.
The cost of subsidies to taxpayers could be "much higher" without benefits guaranteed at
work. The study found that under these proposed schemes companies would have
"powerful incentives" to drop coverage for their employees and to shift costs to the
government, which would subsidize the premiums. [Center on Budget and Policy Priorities]
III.
SHARED RESPONSIBILITY IS GOOD BUSINESS
"The simple math is it saves the company money. It costs about $1,500 per year to cover each
employee, part time and full time, and the cost of attrition if we have to hire and retrain a new
employee is over $3,000." [Starbucks CEO Howard Schultz ]
Starbucks Coffee, with 4,800 employees, was named one of the fastest growing companies
in America in 1993 by Fortune Magazine. CEO Howard Schultz believes that a
comprehensive employee benefits package for all workers is the key to competitiveness: "At
Starbucks Coffee Company adding benefits for part-time and full-time employees is leading
to a healthier workforce and bottom line. The longer an employee stays with us, the more we
save." And Starbucks posts higher profits every year, sales have grown almost 80% over the
last three years, and the stock price continues to climb.
Starbucks Coffee Provides Health
Shared Responsibility Works
Benefits For All Of Its Employees
For STARBUCKS COFFEE
Number of Stores
Earnings ($ Millions)
$10
300
$8
250
200
$6
150
$4
100
50
$2
0
1982
1987
1992
1993
1994
$0
Over 4800 Full Time and Part Time Employees
is
And The Company Keeps Growing And Growing
Source: Starbucks Corporation 494
Source: Starbucks Corporation, 494
PictureTel, the technology and market leader in video conferencing, has doubled the number
of its employees since 1991 to 865. They are able to provide health care benefits to all their
employees and yet still grow at world class rates -- an astonishing compounded growth rate
of 97% over the past five years. PictureTel is the market leader both in the U.S. and in
Europe.
Shared responsibility works around the world.
"[Pizza Hut and McDonalds] are living proof that shared responsibility works for employers and
employees, and as a means for a nation to achieve universal coverage," [The Health Care Reform Project,
"Do As We Say, Not As We Do," July 1994]
Pizza Hut, which earned a net profit last year of $372 million, does not contribute to health
insurance for many of its hourly restaurant workers in the United States. The company does
make a group insurance plan available, but employees are required to pay the full amount.
After six months, the company will contribute to the cost of supplemental coverage, but
paying for the basic plan is still the responsibility of the employee.
By contrast in Germany, Pizza Hut is required to pay 50 percent of its employees' premiums.
As of 1991, there were 64 Pizza Hut restaurants in Germany with revenues of $39 million
and 2,100 employees. In Japan, Pizza Hut is required to pay 50 percent of the premiums for
employees who work at least 30 hours per week -- as most do at any of the company's 65
Japanese restaurants. Pizza Hut is doing so well there that two years ago the company
announced its intention to quadruple the number of Pizza Huts in Japan by 1997.
McDonald's does not cover hourly or part-time workers at its restaurants in the United
States. However, McDonald's does pay for coverage for its workers in Belgium, Germany,
Japan, and The Netherlands. Germany is one of McDonald's six largest markets, with 27,000
employees and revenues of nearly $1 billion in 1992. Likewise, in The Netherlands,
McDonald's now has 100 stores, a 17.6 percent increase over last year. In Japan, the number
of McDonald's restaurants (1,048) has increased 8 percent since 1993.
IV. SHARED RESPONSIBILITY HAS A SMALL IMPACT ON BUSINESS
"In the past, we have taken similar actions to assure workers a minimum wage, to provide them
with disability and retirement benefits and to set occupational health and safety standards. Now
we should go one step further and guarantee that all workers will receive adequate health
insurance protection." [President Richard M. Nixon]
"I can assure you that there's not going to be a single job lost if the insurance plan you are
proposing goes into effect." [Eric Sklar, Owner, Burrito Brothers Restaurants]
A system of employer-employee shared responsibility makes sense because it builds on the
existing system. Nine out of ten Americans with private insurance get it through employers.
[EBRI, 1/94] 85% of firms with more than 25 employees offer their workers health benefits.
[HIAA, "Source Book of Health Insurance Data," 1992]
A recent survey of over 1,000 major employers, including Fortune 100 and Fortune 500
companies, found that "almost all provided medical coverage to full time salaried
employees." [Daily Labor Report, 3/1/94]
Many businesses that already provide coverage could see costs actually drop as the burden of
cost-shifting is lifted. Small businesses -- who currently pay 35% more than large businesses
to ensure their employees than their larger counterparts -- would benefit most dramatically.
[Hay Higgins Report]
The President's original proposal capped contributions at 7.9% of payroll, and with discounts
many small businesses would have paid only 3.5%. Every congressional proposal pending
contains even greater protection for our nation's smallest companies. All of the proposals
would have costs far below the 90 cent per hour minimum wage increase signed into law by
then-President George Bush.
Recent studies of the minimum wage increase show negligible effects on employment. A
study comparing fast food employment in New Jersey where the minimum wage increased,
and Pennsylvania where wages stayed stagnant, found a greater employment increase in New
Jersey. [Card and Krueger. Princeton University]
Studies have estimated that reform with shared employer-employee responsibility will create
jobs -- as many as 258,000 in the manufacturing sector, and as many as 750,000 in home
health care. ["The Impact of the Clinton Health Care Plan on Jobs, Investments, Wages, Productivity and Exports," Economic
Policy Institute November 1993; Reuters, from Brookings Institute study, 9/17/93]
V. HAWAII: HEALTHIER BUSINESSES, HEALTHIER PEOPLE
"It is clear that the "employer mandate," ... has succeeded in bringing Hawaii to the threshold
of universal health insurance coverage. That seems to have helped restrain health care inflation,
a serious problem here but less critical than on the mainland: health insurance premiums are
about 30 percent cheaper here, while almost everything else in Hawaii is more expensive."
["Hawaii is a Health Care Lab as Employers Buy Insurance", New York Times, 5/6/94]
Shared responsibility is neither an untried novelty nor an exotic import unsuited to the American
way of business.
Hawaii (1974), Oregon (1989) and Washington State (1993) are the only states with a current
commitment to universal coverage. All have chosen employer-employee shared responsibility as
the most practical way to achieve it.
Since 1988, the number
of working uninsured
Working Uninsured 1988 - 1993
in America has
increased by 21%. But
Percent Increase In Working Uninsured
during that same period
30%
Washington enjoyed a
19% decrease in its
20%
National
working uninsured,
10%
Averag
Hawaii saw a 15%
2113%
0%
dropped in working
uninsured, and
-10%
Oregon's shrank by
-20%
2%. [CPS and Census data,
Source 1988. 1993 Census and CPS.
1988, 1993]
Hawaii, the state that's had shared responsibility the longest, has 96% coverage. Employer-
paid premiums are 30% lower than they are on the mainland. [GAO, 2/94; Hawaii Department of Health,
11/92].
Shared Responsibility Works For
Small Businesses In Hawaii
$ Premiums
Small Business Cost
$2,000
On Mainland
Small Business
Costin Hawaii
$1,500
$1,000
$500
$ 0
Premiums Are 30% Lower Than The National Average
Source: "Health Care in Hawall: Implications for National Reform." General Accounting O ffice. 2/94
Since Hawaii began asking all employers to provide insurance in 1974: the unemployment
rate has dropped to one of the lowest in the nation; small business creation has remained
high; and the rate of business failures is less than half the national rate. [Hawaii Department of Labor
and Industrial Relations; Dun and Bradstreet, Monthly New Business Incorporation Rate; Journal of the American Medical Association.
5/19/93]
"Universal access is in itself a cost-containment strategy. Because virtually all of Hawaii's
people have access to primary care through the employer mandate and the state programs it has
made possible, utilization of high-cost services is well below the rest of the nation. This leads to
low health care costs, comparatively low small business insurance rates, and a lower portion of
gross domestic product spent on health care when the state is compared to the rest of the
nation. " ["Hawaii Employer Mandate and it's Contribution to Universal Access" JAMA, 5/19/93]