The Revamped "Fair Share Act" is Still Wrong in Principle and Practice
February 2007
Two new proposals would require all companies in Washington with 1,000 or more employees to provide health insurance benefits to their employees or pay compensation costs or a fine to the state treasury if an employee receives health insurance from the state. Employers would be required to report the number of employees to the Health Care Authority and the Department of Social and Health Services, which would then cross-reference the roster with those appearing on the state’s Basic Health Plan (BHP) and Medical Assistance (MA) program rosters but companies would not know which employees are on the state’s lists. Both programs are taxpayer-funded systems that help subsidize health care for low-income families. Companies with employee names on the BHP or MA list would be required to either pay a fine or pay the employee’s health care costs to the state. In some cases the state could levy both assessments.
Washington Policy Center’s analysis finds these proposals to be flawed public policy in two primary areas: it is wrong in principle and wrong in practice.
The “Fair Share Act” is wrong in principle because it unfairly targets a narrow group of companies. Citizens should always be concerned when certain groups or businesses are singled out as the focus of government power. According to Employment Security Data from early 2006, there are 187 companies in Washington with more than 1,000 employees and combined they employ just over 460,000 people.
Mandating that employers must cover every single employee deprives workers of choice. Understandably, the goal is to have none of these companies’ employees on BHP or Medical Assistance, but fining a company because an employee freely chose to use legal resources available to them is bad regulatory policy. Increasing the regulatory burden on Washington will encourage outsourcing to other states and countries.
The bill is unfair to business owners who should have a right to run their business free from micro-managing by the state. If the largest companies can be hit with a costly and inflexible mandate, then no business in Washington is immune to similar treatment.
The “Fair Share” bill says, “it is not the intent of the legislature to influence the establishment, content or administration of employee benefit plans. The legislature is neutral regarding whether employees choose to provide access to affordable health care coverage for their employees or pay an assessment to reimburse the state’s costs for health care services for their employees.”
This statement is simply not true, the entire purpose of the bill is to direct a company’s employee benefit plans by allowing only two options: provide health benefits or pay the state. This is not freedom of choice – it is a thinly veiled threat to comply or else. Businesses cannot force employees onto company-sponsored health plans, but are punished for employees who choose to be insured by the state. The proposals do not lay out a specific level of benefits that business-sponsored plans must offer. Therefore it is conceivable that workers who were insured by the state and switched to their employer’s health plan could have access to fewer services if the employer’s plan is less expansive than the state’s.
These proposals are also wrong in practice because it would not, as it claims, increase access to health care for Washington workers.
The bill states one of the goals is to “provide access to appropriate health care services for all its citizens.” By attempting to impose a mandatory, top-down solution, the bill actually makes it harder for Washingtonians to gain access to affordable health care because the bill discourages new jobs. It creates a strong incentive for companies to maintain no more than 999 employees in Washington, and punishes companies that attempt to hire more workers. Any business exceeding the 1,000-employee threshold will have to take into consideration even higher labor costs before further expanding its workforce.
This bill shifts where some employees get their health care insurance – but no new employees will have access to insurance. Those receiving insurance from the state would instead receive it from their employer. This does not reduce the number of uninsured in Washington.
For 19 years, it has been the express policy of Washington state to sign up working people to the Basic Health Plan. It is illogical and contradictory to criticize employers when workers actually join the state plan for which they are legally eligible.
It is equally wrong to say that public health programs for working poor are “corporate welfare.” Corporate welfare is special economic benefits or market protections that policymakers give directly to favored companies. Many working people live in public housing, receive food assistance and use subsidized transportation. These important social programs are not “corporate welfare” to the companies that give these workers jobs, and neither is broad-based subsidized health care.
The “Fair Share Act” also pegs important qualifiers regarding who should pay for benefits and who should receive benefits, based on subjective arguments. The proposals claim “some employers with adequate resources fail to offer affordable access to health care services to their employees in Washington state.”
The definition of “adequate resources” is entirely subjective. Is any profitable company with over 1,000 employees considered to have “adequate resources”? Furthermore, who is qualified to make the decision? Larger companies are often seen as more capable to pay for employee benefits – and the consensus among policymakers is therefore they should be made to do just that. However, how much time will pass before any for-profit business, including small businesses, will be held to a similar standard? Similar proposals last Session only targeted businesses with more than 5,000 employees. This year, smaller businesses are also targeted. It seems a matter of when, not if, small businesses—those employing fewer than 50—are targeted as well.
This mandatory approach ignores the large artificial costs the state already imposes on the provision of health care coverage. Employer-sponsored health care coverage has been trending down over the past decade – and the reason is not because of greedy business owners. Instead, the price of health care is making it harder for businesses, particularly small businesses, to provide health insurance coverage. The greatest barrier to health insurance is cost. State policies contribute significantly to the cost of health insurance.
Following are five constructive ways the legislature can reduce artificial
costs and increase access
to affordable health care for all people in Washington.
Reduce expensive
health care mandates. Washington
imposes 50 (with possibly more on the way)
mandates on every insurance policy sold in
the state,
forcing people to pay for coverage they
may not want or need. Together, mandates
conservatively
add 15% to 20% to the cost of health coverage.
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Bring back competition. Because of Washington’s costly regulations, only a handful of insurance companies offering health coverage remain in the state.
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Lower medical malpractice costs. The state’s legal system needlessly drives up the cost of medical malpractice insurances, and these costs are reflected in the higher price of health coverage.
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Encourage personal Health Savings Accounts (HSAs) that put consumers in charge and reduce the number of uninsured (one in three Americans with HSAs previously had no coverage).
The “Fair Share” approach does nothing to make health coverage more affordable, personal or portable. It is not only unfair, it moves our state in exactly the wrong direction.