Insure or else: Who should pay for uninsured workers?

More than 30 years ago, Hawaii faced a growing uninsured population and became the nation's first state to require companies to provide health insurance for employees working 20 or more hours a week.

A few states tried employer mandate bills that failed in the 1990s.

But now, with 45 million uninsured Americans draining state financial resources, more states than ever before are looking to pass laws that would shift the cost of those lacking insurance away from state Medicaid programs and onto employers.

At least 31 state legislatures are entertaining -- or have already entertained -- bills this year that would try to coerce, encourage or even shame companies into providing coverage for their workers, according to the HR Policy Assn., a public policy organization of senior human resources executives of the largest U.S. employers.

At least 11 of those would mandate larger companies to provide insurance.

States see the measures -- sometimes referred to as "Wal-Mart bills" because some states have found that a number of the retail chain's employees are on Medicaid -- as a way to reduce the health care costs that have contributed to budget woes.

"Legislatures are trying to figure out how to balance their budgets, and they see Medicaid as a major piece of the pie," said Laura Tobler, health care analyst for the National Conference of State Legislatures.

Federal lawmakers are in on the action as well. Sens. Edward Kennedy (D, Mass.) and John Corzine (D, N.J.) in June introduced the Health Care Accountability Act, which would require states to report the number of workers at large companies who receive health coverage through taxpayer-funded health care programs.

But businesses have fought hard against the bills in states such as California, Colorado, Illinois and Maryland. They say individual state solutions can have the opposite effect of reducing employment opportunities and, therefore, health care coverage.

"There's no better way to ensure that a state will lose employers than to mandate health insurance coverage," said Neil Trautwein, the National Assn. of Manufacturers' assistant vice president for human resources policy.

A number of state legislatures are still considering bills. But in the few states where lawmakers have passed legislation, governors or voters have stymied the efforts.

Still, doctors are encouraged to see states trying to do something to help people obtain health insurance because uninsured patients are stretching hospital resources to the snapping point. They also are driving up the costs of coverage for everyone who pays for health plans. And doctors often are hard-pressed to make up for losses they incur when treating the uninsured.

Physicians have been engaged in the legislative fights in some states, getting involved because they are driven to stop emergency departments from serving as primary care clinics. Doctors also see the measures as a way to try to reduce the number of patients showing up with emergencies that could have been avoided with preventive care.

"If we don't do something quickly, the entire emergency health care system will be so destabilized, it will have a hard time functioning," said Jack Lewin, MD, the California Medical Assn.'s CEO.

Dr. Lewin believes that doctors have a moral responsibility to take a leading role in ensuring the health of Americans, and he said the CMA has been working with California legislators on solutions to the problem.

"Pay or play" and other tactics

The most direct way to get employers to provide coverage for their employees is simply to require them to do so by state law or if they don't provide insurance then require that they pay into a state fund, something that's been dubbed "pay or play."

At press time, 11 states were considering or had considered legislation this year that would do that, according to the HR Policy Assn.

Other bills in the 31 states considering legislation would require employers to provide health insurance to be eligible for state contracts or for business development programs. And some proposed laws are aimed at embarrassing companies into extending coverage by issuing reports that indicate the number of employees who receive state health care assistance.

For example, at press time:

• Arizona was considering a bill that would require employers with more than 100 full-time workers to reimburse the state for Medicaid services their employees use.
• Connecticut lawmakers were looking at a bill that would require most employers to provide health benefits or pay into a state-run program to provide health care.
• Massachusetts was considering a measure asking that employers who do not provide health coverage pay into a state pool that helps compensate hospitals for providing free care.

Massachusetts state Sen. Marc R. Pacheco said he had introduced the bill partly as a matter of fairness. "In our state, companies that don't provide health coverage have a competitive advantage over those that do. This [bill] should help level the playing field a bit," he said.

Several state efforts halted

In 2003 California became the first state to enact a mandate since Hawaii passed its law.

Co-sponsored by the CMA and the California Labor Federation, the law required employers with 200 or more employees to pay 80% of workers' premiums or else pay into a state fund to cover Medicaid and other state health program costs. By 2006, employers would have had to cover workers' dependents. Employers with 50 to 199 workers would have fallen under the mandate in 2007.

But the victory for physicians and laborers was short-lived. In November 2004, a business-backed state referendum to repeal the law narrowly passed 50.9% to 49.1%.

The California Chamber of Commerce fought against the law because it believed it would have cost at least $7 billion the first year and driven jobs out of the state.

"This mandate would have been a huge blow to economic reinvigoration in our state," Chamber of Commerce President Allan Zaremberg said in a statement. While admitting that there's a crisis in California's health care system that must be addressed, Zaremberg said that "placing this multibillion-dollar tax on California's job creators is not the answer."

Other states have seen governors stop bills from becoming law. In May, Colorado Gov. Bill Owens vetoed a bill there. Also in May, Maryland Gov. Robert Ehrlich held a public ceremony to veto legislation that would have mandated that for-profit companies with more than 10,000 employees spend at least 8% of total wages on health insurance costs.

Ehrlich said states should not be in the "business of micromanaging an employer's payroll."

Wal-Mart executives, who opposed the bill, were on hand for the veto. The company would have been one of four that the legislation impacted.

Susan Chambers, executive vice president of benefits administration at Wal-Mart, agrees that there is a health coverage crisis in this country and said Wal-Mart is "eager" to work with legislatures and others to make health care more affordable. But she said "targeting a single company is simply not the answer." She noted that Wal-Mart employs more than 1.2 million people in the United States and insures more 900,000 individuals. That number includes employees and family members.

Acknowledging that the bill would have only very modest direct effect on the number of people covered, Glenn Schneider director of the Maryland Citizens' Health Initiative, one of the bill's supporters, believes it would have been a good start and could be a template for other companies to follow. "If we get Wal-Mart to provide coverage, it could have a cascading effect," Schneider said.

His group is working to get the Legislature to override the veto.

The Maryland State Medical Society did not take a position on the bill, but internist Nelson Goodman, MD, a member of MedChi's health policy committee, supported the bill as an individual because he believes it's easier to build on an existing foundation than to start from scratch.

"Currently, most people get coverage through their places of employment. So it makes sense to try to get more employers to cover workers," he said.

Taking it to the federal level

Some experts believe that ultimately the uninsured problem may not be fully solvable on a state level.

"The primary issue is the cost of coverage," said Jeff Munn, health care legal consultant with Hewitt Associates, an Illinois-based human resources services company.

Trautwein, from the manufacturer's association, agrees. "We need to find ways to lower the costs of coverage so employers and employees can afford it," he said.

With double-digit annual premium increases for at least the past five years, many employees can't afford to purchase coverage even if their employers offer it, Munn said. "Each side is trying to move the boulder in the road to the other side. But the real problem isn't where the boulder is, it's the size of the boulder," he said.

The AMA has offered a federal solution. Rather than requiring employers to pay for coverage, there would be a system of subsidized, individually selected and owned health insurance.

"People are in the best position to know what kind of coverage is best for them," said John C. Nelson, MD, MPH, the AMA's immediate past president.

He said employer-sponsored health coverage -- originally instituted as a way to get around World War II-era wage controls -- should be changed to ensure that people maintain the same coverage as they change jobs or become unemployed.

But no matter what side people are on, they agree that something has to happen soon, because the problem of the uninsured is a gathering storm whose damaging winds have blown the roof off of many individuals' financial houses and are now aiming at state budgets and the American health care system in general.

"Many state legislatures and the federal government are frozen by the enormity of the problem," said Jonathan Parker, national campaign director for Americans for Health Care, a national advocacy group. "But if they don't act, and soon, the problems will get much, much worse."