House Panel Finds Employer Health System Support

April 30, 2009 ( - Witnesses testifying Wednesday before a U.S. House committee argued that lawmakers needed to keep the basic employer-based health system in place, but fix its many deficiencies.

The House Ways and Means Committee witnesses also urged lawmakers not to cap or drop completely the tax break available to employers with workplace health plans because the proposal would hurt many small firms.

Randy MacDonald, senior vice president for human resources at IBM, testified that the computer giant supported a health program that would:

  • build upon the employer-based system;
  • control costs and improve value in terms of quality and health status;
  • ensure all Americans have health insurance;
  • enhance the focus on wellness, prevention, and primary care;
  • accelerate the adoption of health information technology.

“Large employers like IBM have become more active in this debate because we see pervasive deficiencies in the availability of comprehensive primary care; the lack of evidence-based use of medical technologies; insufficient transparency to allow consumers to make informed decisions; and inadequate adoption of information technology that would make care safer and more efficient,” MacDonald asserted.

In the United States during 2008, IBM provided health coverage for 118,500 employees, 93,200 retirees, and 235,000 dependents for a 2008 price tag of $1.27 billion, MacDonald said.

Also at the hearing, Gerald Shea, special assistant to the president, AFL-CIO, testified that the current system may have flaws, but it is still better than what Americans would encounter by trying to buy insurance on the retail market.

“Despite its flaws—including higher cost sharing and the hassles and outright denials they’ve come to expect from insurance companies—most Americans are happy with their employer-based health benefits, in large part because they know it is still far superior to being on their own in the individual insurance market,” Shea contended. “Building on this core piece of our health care system will both minimize disruption and garner greater public support.”

Shea contended chief goal for health-reform efforts should be to bring down costs. "To build on the employer-based system, we must stabilize it by lowering costs that have driven the steady erosion of employer-sponsored benefits so that workers can retain the coverage they have and other workers now left out can gain health coverage," he testified. "Doing so will reverse the trend to more and more uninsured:  the share of Americans who obtain coverage through their employer is strongly and inversely correlated to the share of Americans who are uninsured."

The union official joined other witnesses in urging lawmakers to move carefully before changing the current employer health coverage tax breaks.

"We believe this would be a step in the wrong direction," Shea said. "A cap on the tax exclusion would disproportionately affect firms with higher-cost plans because of factors other than the level of coverage, including a higher percentage of older workers, higher risk in the industry and firm size….Finally, capping the tax exclusion would undermine the place where most Americans now get their coverage before we have built a proven effective, sustainable alternative to employer-based plans."

The tax change "should be the dessert, not the appetizer, and it should not be considered until large-scale health reform is in place to cover everyone," offered Elise Gould, director of health policy research at the Economic Policy Institute.

The panel also heard differing views on the effects a new public insurance plan would have on the system, including whether it would contribute to the erosion of employer-sponsored coverage.

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