VPR: Some of the state’s largest employers are on edge over the Shumlin administration’s plan to lure them into a single-payer health care system. And business officials worry that new taxes on those companies could drive them out of state.
Gov. Peter Shumlin won’t unveil his single-payer financing proposal until the end of the month. But in an interview on VPR last week, Administration Secretary Jeb Spaulding revealed that the plan will likely seek new revenues from what are known in health care parlance as "ERISA" companies, named after the federal law that allows them to self-insure.
ERISA employers are often multi-state companies, like IBM or National Life or General Electric. And they’re large enough to cover their own workers. Federal law prevents Gov. Peter Shumlin from forcing these companies to participate in Vermont’s single-payer program.
But Secretary Spaulding says the state is well within its rights to collect from the companies – and their workers – the payroll, income or other taxes that might be used to fund single-payer. And he says the administration would be hard-pressed to come up with a workable plan that doesn’t include them.
His comments are not sitting well with many ERISA companies.
"You know, it just reminds me of the old line of trying to make an offer you just can’t refuse." – Chris Graff, vice president for communications at National Life
“I was very sorry to hear … that they want to pressure employees to participate,” says Chris Graff, vice president for communications at National Life Group an insurance and investment company that employs about 800 people at its Montpelier headquarters. “You know, it just reminds me of the old line of trying to make an offer you just can’t refuse.”
Last week, the online news website VTDigger.org cited anonymous sources to report that the Shumlin proposal will rely on an 8 percent payroll tax, combined with an income tax of some kind. Administration officials say the plan is still a work in progress, and won’t comment on any details.
But the administration plan, as it relates to ERISA companies, would function as both a carrot and a stick. Spaulding says ERISA employers aren’t going to want to contribute tax revenues to a program without getting any benefits from it. And he says they’ll then be motivated to adopt the publicly funded plan as their own.
But Bill Driscoll, vice-president of Associated Industries of Vermont, says ERISA companies won’t appreciate this kind of government pressure on their business plans. And he says that instead of embracing single payer, it’s more likely that companies would instead find ways to minimize their presence in the state.
“So our concerns is that this could have a very chilling effect on companies, especially multi-state corporations that employ a lot Vermonters now, whether or not new ones would want to come to Vermont, and really whether or not those who are here are going to want to continue to be investing in this state," Driscoll says.
Rutland Sen. Kevin Mullin says he was upset to hear that the administration plans to collect revenues from workers who might be covered by ERISA plans, or the companies administering them. Mullin helped write the single-payer legislation, and will chair the Senate committee that tries to assess its economic impacts.
“Well, unfortunately I think what the governor did was whisper into a lot of ears to people at larger companies in state, saying they weren’t going to be affected by it,” Mullin says. “And so some of them are little bit caught off-guard by what he has proposed.”
"Well, unfortunately I think what the governor did was whisper into a lot of ears to people at larger companies in state, saying they weren’t going to be affected by it." – Rutland Senator Kevin Mullin
Proponents of single-payer say that without pay-in from ERISA companies, Vermont simply can’t afford to support a universal program. Self-insured companies provide insurance to about 20 percent of the state’s population – and those people would be key to having a large enough risk pool to support a single-payer system.
Graff says National Life is in Vermont to stay, no matter the outcome of the single-payer debate. But he says the future of health care reform in Vermont could very well impact the future of National Life as well.
“Every company can make decisions. We have a growing campus in Texas. If we needed to, we could always make it grow faster,” Graff says. “But that’s not something we want to go through there.”
Shumlin is due to unveil the financing plan on Dec. 29 or Dec. 30.
Graff says National Life has been a willing participant in the single-payer discussion, and that the company looks forward to seeing Shumlin’s proposal when it’s unveiled later this month.
“But I think it’s difficult for us to imagine how this works to the benefit of our employees,” Graff says.
Graff says National Life has worked hard to develop an insurance plan that fits the company’s values and culture. Investments in wellness programs, for instance, have helped minimize health care expenditures among employees. And the benefits package, he says, have been tailored to optimize the cost-benefit formula for the population of workers employed by National Life.
“Our self-insured program and our self-insured pool works very well for us, at a very low cost, and we have very good benefits,” he says.
Driscoll says executives at other self-insured companies are dubious about the state’s ability to find a universal plan that works as well as the one they’ve fine-tuned to meet the needs of their businesses. The imposition of a payroll tax and a standard statewide benefit package, according to Driscoll, would turn health care into a fixed cost over which they have far less control.
When health care costs rise now, Driscoll says businesses have a range of options for dealing with them, from paying higher premiums, to encouraging lifestyle changes among workers, or just cutting benefits.
In 2011, as the Legislature debated the single-payer legislation, IBM emerged as a leading critic, in large part over the prospect of being subject to a new payroll tax.
“The imposition of employer payroll taxes, or assessments of any type that produce incremental costs or cost shifts to employers, will compromise our competitiveness,” IBM lobbyist John O’Kane said.
The imposition of a payroll tax and a standard statewide benefit package, according to Driscoll, would turn health care into a fixed cost over which ERISA companies have far less control. And no matter the size of the initial payroll tax proposal, Driscoll says executives are convinced that their tax bills will rise as demands on the system increase.
“And I don’t think anybody really believes that whatever number might come forward as the original payroll tax amount, that that’s going to stay at that amount, and not increase,” Driscoll says.
Proponents of publicly funded health care say employers’ ability to diminish the quality of their workers’ insurance benefits, as financial conditions merit, is one of the many reasons that single-payer health care makes so much sense.
Vermonters’ well being, they argue, shouldn’t be subject to the whims of corporate executives who may be more concerned about shareholder profits than the health of their own employees.
And Shumlin’s central argument in favor of single-payer has always been an economic one. Under the retooled system, he says, employers will be paying less in health care costs than they do now. And their workers, he says, will enjoy benefits comparable or better. Single payer, Shumlin says, is the single best jobs program Vermont can adopt.
But Mullin says that between the leaks and selective disclosures about what the plan will look like, Shumlin isn’t helping his signature cause.
“This thing is like threading a needle, it has to be done so carefully. And the administration hasn’t shown the ability to do anything carefully at this point,” Mullin says. “So let’s hope that things go a little bit better starting in January, and that everybody is working together on something that makes sense for Vermont, because otherwise I think we have to abandon it.”