Business Groups Join Opposition To McCain Health Care Plan

John McCain’s health care plan is being opposed by many business organizations who realize that his plan would be harmful to them, along with being harmful to their employees. The New York Times reports:

American business, typically a reliable Republican cheerleader, is decidedly lukewarm about Senator John McCain’s proposal to overhaul the health care system by revamping the tax treatment of health benefits, officials with leading trade groups say.

The officials, with organizations like the U.S. Chamber of Commerce, the Business Roundtable and the National Federation of Independent Business, predicted in recent interviews that the McCain plan, which eliminates the exclusion of health benefits from income taxes, would accelerate the erosion of employer-sponsored health insurance and do little to reduce the number of uninsured from 45 million…

Mr. Obama, the Democratic presidential nominee, opened his assault two weeks ago by telling crowds that Mr. McCain “wants to tax your health benefits.” He did not explain that Mr. McCain, the Republican nominee, would offer tax credits in exchange to cover the increased liability for many Americans.

Over the weekend, Mr. Obama more accurately characterized the McCain plan as a swap but one that would work to the detriment of millions. Middle-class families, he said, would “watch the system they rely on begin to unravel before their eyes.”

The business leaders said that was also their fear. Despite steady declines this decade, employers still provide coverage to 62 percent of Americans younger than 65. Surveys show that they want to continue doing so to attract and maintain a productive workforce.

The business leaders forecast that Mr. McCain’s free-market approach would impose particular burdens on small businesses and old-line manufacturers that are already struggling.

“To some in the business community, this is very discomforting,” said R. Bruce Josten, executive vice president for government affairs at the Chamber of Commerce. “The private marketplace, in my opinion, is ill prepared today with an infrastructure for an individual-based health insurance system.”

Health economists are ideologically divided over Mr. McCain’s plan. Analysts who support it project that it might provide coverage to 25 million people, while critics predict that the number of newly insured would peak at five million and then decline.

Though Mr. McCain says his plan would not add to federal spending, the Tax Policy Center has estimated that it will cost at least $1.3 trillion over 10 years. And while right-leaning economists emphasize that the plan would provide a tax cut for the average American, opponents respond that certain high-earners will face an increase and that some in the middle class may break even only by reducing their coverage…

Yesterday The Wall Street Journal reported that McCain would pay for the plan by cutting Medicare and Medicaid spending.

Officials with eight business trade groups contacted by The New York Times predicted the McCain plan would raise costs and force some employers to stop providing health benefits.

A recent survey of 187 corporate executives by the American Benefits Council and Miller & Chevalier, a consulting firm, found that three-fourths felt the repeal of the tax exclusion would have a “strong negative impact” on their workers. Only 4 percent said they would provide additional pay to fill any gaps.

John J. Castellani, president of the Business Roundtable, an association of leading chief executive officers, said his group instead supported extending the tax exclusion to those who bought coverage on their own.

“One of the things we don’t want to do,” Mr. Castellani said, “is jeopardize 170 million Americans who do get insurance through their employers.”

A number of business officials are worried that Mr. McCain’s tax credits would lure young and healthy workers into the individual market to take advantage of cheaper, less-generous policies. That, they say, would leave employers to cover an older and sicker pool of workers, forcing up premiums.

Workers who found that they had less buying power with the tax credits than with the tax exclusion could be expected to pressure employers to raise salaries or benefit subsidies, the business officials said.

“There are huge questions about the $5,000 per family being an insufficient amount in terms of being able to purchase the same coverage,” said Mr. Josten with the Chamber of Commerce.

Helen B. Darling, president of the National Business Group on Health, a coalition of 300 companies, agreed that many workers would face a net loss. “The last thing you want to do to the average working person, especially when you’re bailing out big financial companies, is take something they hold near and dear partially away,” Ms. Darling said.

Economists forecast that the problem would worsen over time because Mr. McCain, according to advisers, would index his tax credits to overall inflation. Health insurance premiums have grown four times faster than inflation since 1999.

James A. Klein, president of the American Benefits Council, said concern that the tax credits would not keep up with inflation was a primary reason his 280 member companies “take a very dim view” of repealing the tax exclusion.

Mr. McCain theorizes that if the government’s subsidization of health care is capped, consumers will cut back on their use of the system, slowing the growth in spending. But critics worry that he overestimates his ability to control health costs, and that a growing number of people will find they cannot obtain traditional coverage.

These objections to McCain’s plan from business groups are similar to the objections raised by The Commonwealth Fund and in a recent article by Jane Bryant Quinn.

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