Business leaders hope Obama can cut health costs

by Lesley Politi on December 11, 2008

By Cathy Weselby

updated 4:00 p.m. PT, Sun., Dec. 7, 2008

Health care reform is on everyone’s lips, from President-elect Barack Obama to the country’s business leaders and their employees.

While most Silicon Valley leaders agree that the health care system needs repair, the private sector has concerns about how these changes might impact the bottom line during tight economic times.

These concerns range from containing rising medical costs and insurance premiums to ensuring employers are not the only ones footing the bill for reform.

Obama’s proposed plan would stop insurers from rejecting applicants because of pre-existing conditions, reduce the cost of care and cut insurance industry profits. It would invest heavily in information technology and focus on the prevention and management of chronic diseases.

Sam Smith, vice president with the California Association of Health Underwriters, said that unless everyone is required to sign up for coverage, Obama’s plan would result in “an almost immediate unraveling of our individual health insurance market and skyrocketing of premiums.”

To that end, the insurance industry has responded with its own idea for health care reform.

On Dec. 3, an insurance trade organization, America’s Health Insurance Plans, proposed offering coverage for everyone, including those with pre-existing conditions. But its proposal is based on everyone mandated to buy health insurance — similar to motorists being required to have car insurance. Obama’s proposal does not have such a mandate.

AHIP is urging Congress to reduce future health care costs by 30 percent over the next five years.

Robert Zirkelbach, spokesman for AHIP, said many of the cost containment initiatives are also centered around the management of chronic diseases, such as diabetes, to avoid costly complications.

According to the California Hospital Association, 80 percent of health care costs are spent during the last couple of years of a person’s life as a result of chronic disease.

“The most expensive thing we can do is do nothing at all,” Zirkelbach added.

Business leaders struggling with rising insurance costs are closely monitoring what government leaders and the insurance industry are proposing. California has more uninsured residents than any other state, according to an August U.S. Census Bureau report, with 6.72 million people lacking coverage in 2007.

Pat Dando, president of the San Jose Silicon Valley Chamber of Commerce, said that contrary to what people may think, the business community is in favor of improving health care coverage.

“When your employees are healthy, your bottom line is going to be healthy,” Dando said.

She said when health care is not affordable for everyone, the cost of the uninsured is shifted to the private sector with more visits to hospital emergency rooms.

“That cost shifting amounts to $14 billion in hidden taxes for California employers,” she said.

Dando added that it’s important that the cost of reform be spread out so that one group doesn’t shoulder the burden.

“Businesses shouldn’t be required to pay the lion’s share of health care coverage,” Dando said. “We don’t want to have unintended consequences where employers have to cut costs and can’t add jobs.”

The impact of employer-mandated coverage is being carefully examined in the retail and hospitality sectors, which have many hires that are not insured.

California Restaurant Association spokesman Daniel Conway said with Gov. Schwarzenegger’s health reform proposal earlier this year, there were concerns that employers with low-margin businesses such as restaurants would be forced to provide coverage.

“We never saw anything in the governor’s plan that was going to control costs over time,” Conway said.

Medical leaders say they are open to Obama’s initiative to streamline work flows with electronic medical records. The industry has the technology to reduce costs.

California Medical Association spokeswoman Amber Pasricha Beck said her organization strongly supports the use of information technology in health care because it avoids duplications and increases efficiency.

California Association of Health Underwriters’ Smith said, “We must standardize our medical records technology and adopt best practices throughout our system and begin to place greater emphasis on quality of care and stop rewarding our providers for merely quantity of care.”


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