October 11, 2015

How Business Executives Must Engage With Government

At a time when businesses are trying to reduce costs to continue to be profitable when revenues are either declining or flat, it is tempting to reduce spending on government advocacy, especially if a business believes that it is adequately represented by trade associations or coalitions. Nothing could be riskier. Let me illustrate my point by discussing the evolution of health care legislation.

Contrary to what is sometimes reported in the popular media, large, self-insured employers want to continue to control and manage their own health plans for their employees, and are unenthusiastic about the “single payer” system, which would take control of health care costs away from them, and place it with a government-owned organization. While some employers think a single payer plan will reduce their health care cost outlays, this is probably not the case, and, more likely than not, they will pay more, except that it will be in the form of one or more kinds of taxes. In fact, when I hear the comment that Toyota has an advantage over GM because Toyota does not have to pay health care costs, I am astounded that any intelligent person accepts this argument uncritically. Someone, whether it is Toyota or another category of Japanese taxpayer, pays for the health care costs of Toyota employees. While a single payer system spreads the cost over a larger population, the real driver of health care costs is not who pays, but how much is paid, based on usage and cost-per-unit.

However, getting back to the point of this blog, President Obama has repeatedly said that if individuals like their health care plan and their current doctor, under his proposed reform framework, they will be able to retain what they have. He has repeatedly commended companies like Pitney Bowes and, in his June 15 address to the AMA, Safeway and its great leader Steve Burd, for their great health care programs. The implication for a business leader listening to the President is that any legislation emerging from Congress will be designed to leave such plans intact.

However, if one looks at the proposed health care reform legislation emerging from the Senate Health, Education, Labor, and Pension Committee called the American Health Choices Act, the fine print yields a very different conclusion, as does the perspective emerging from conversations many people have had with the staff of the House Ways and Means Committee. In their view, anyone, including employees currently in a self-insured employer plan, should be free to participate in a government-sponsored plan, and the President has publicly stated that there should be competition among government plans, private insurance, and self-insured employer plans. The details of that competition become critical, and they will determine whether the public plan merely attempts to cover people who do not have satisfactory, affordable coverage today, or whether it puts self-insured employer plans into a death spiral.

Moreover, a similar bill pending in Connecticut and passed by both houses of the General Assembly called the SustiNet bill similarly opens up a public plan to those earning at or less than 4x the Federal Poverty Level, and SustiNet requires an employer of an individual who enrolls in the public plan to pay a penalty into that plan.

Why does this matter? Every health plan is designed around the principle that healthy individuals who spend less on health care each year subsidize those with large health care bills. If a healthy individual leaves a plan, the employer or insurance company or government payer loses a profitable member, and has to increase rates from other members. Over time, the rates go up, more healthy people leave the plan, and the plan becomes unsustainable.

I was a member of the HealthFirst Authority, a public-private task force very capably co-chaired by two dedicated and thoughtful individuals Tom Swan and Margaret Flinter. The HealthFirst recommendations to the General Assembly struck the appropriate balance between covering the uninsured and protecting existing plans. Unfortunately, as the legislation made its way through the system, it got much more threatening to large self-insured plans.

I have talked with many CEOs and government affairs representatives of self-insured employers. None of them picked up on this obscure provision of the SustiNet legislation. The Connecticut Business and Industry Association understood it, but the CEOs and other senior executives of large Connecticut companies outside the health care industry really did not understand or focus on this legislation, even though it threatens a basic employee benefit they offer.

It is great that President Obama receives CEOs at the White House and listens to them. It is also great that Democratic and Republican Senators and Congressmen listen to CEOs and others who advocate on health care. However, the real battles are on obscure provisions in the legislation, as well as complex, irrational, and non-transparent budget scoring rules that CEOs and their government affairs teams never touch or understand. There is an old saying that “the devil is in the details,” and that is clearly true here. Unfortunately, businesses are not engaged at the level of detail that enables them to pick up these issues and address them.

At a time when government is more activist than ever, it is not enough that businesses and other stakeholders have meetings with senior government officials or their key staffers, and present generic concerns. They need to understand at the level of specific legislative language and budget scoring rules what is happening, and how to modify existing proposals and rules.

CEOs and board of directors have often told me that it is not their job to get into the detail relative to governmental actions because they have “experts” whom they hold responsible for this, but my response is that it is absolutely their job to get into the detail that makes a life-and-death difference to their business. Government affairs professionals, lawyers, lobbyists, and trade association representatives can only understand and influence issues to a limited degree. CEO brainpower and influence is needed on the most important issues, and mastery of the details is essential.