Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, May 18, 1993 TAG: 9305180142
SECTION: NATL/INTL PAGE: A6 EDITION: NEW RIVER VALLEY
SOURCE: Los Angeles Times
DATELINE: WASHINGTON LENGTH: Medium
The decision is expected to end speculation among businesses, employees and unions who were concerned that approval of a health-care reform package would force immediate cuts in coverage.
"Our contracts will be protected, so all of a sudden people won't find themselves without the benefits they negotiated," said a union official. "We are assured that national health-care reform won't be used to cut back benefits."
About 14 million American workers receive health-care benefits specified by union contracts, and the administration's plan to honor existing contracts is designed to ease the blow of health-care reform on a key constituency.
Business and labor movement representatives have been told by high-ranking officials in the administration's health-reform planning group that union contracts, which usually run from one to three years, will be fully protected from any changes in health coverage.
The White House is anxious to avoid the political opposition that would come from interfering in the collective-bargaining process by trying to alter contracts signed by business and labor unions. Health benefits have become an increasingly important issue in recent years.
Under the administration's plan, businesses would be discouraged from granting benefits that exceed those in a standard benefits package being drawn up by health-care planners. Businesses probably would be prevented from taking a tax deduction for anything they spend in excess of the standard package.
"If it is no longer tax-free, there will be no reason for companies to provide high levels of health care instead of cash," says an executive who attended a recent high-level health care briefing by administration officials.
For companies with union agreements, the limits on business tax deductions would not take effect until the expiration of the contracts signed before the health-reform plan is enacted into law.
Unions would presumably enter new contract negotiations seeking additional wages or other benefits to replace the value of the money previously spent by their employers on enriched health benefits.
For example, suppose a company had been spending 15 percent of its payroll on health care. Under proposals being considered by the administration, that expenditure would be replaced by a 7 percent payroll tax paid by all businesses.
The unions might then ask for the 8 percent difference in the form of benefits or wages, at least partially to offset a new 3 percent health-care payroll tax the administration is considering levying on workers.
The administration is expected to devise a standard package of medical benefits that would be available to all Americans, with every business required to provide coverage to its workers, regardless of any health problems they may have. The money paid by businesses and their workers - the payroll charges of 7 percent on businesses and 3 percent on employees - would go to local health-purchasing groups, called health alliances.
The alliances would negotiate with networks of doctors and hospitals and health maintenance organizations to deliver health care under a concept called "managed competition." Under it, the networks - some owned by insurance companies, some operated under the Blue Cross or Blue Shield systems, some independent - would compete for enrollment. An individual would decide annually which network to join, and would be required to receive all care for that year exclusively from the doctors and hospitals in the network.
Memo: shorter version ran in the Metro edition.