Starbucks CEO Switches View on Obamacare’s Employer Mandate

Written By: Sarah McIntosh

Published In: Health Care News > June 2011

Publication date: 05/10/2011

Publisher: The Heartland Institute

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In the latest round of public opinion shifts among employers regarding President Obama’s health care law, Starbucks CEO Howard Schultz has done an about-face.  Originally a strong supporter of Obamacare, he has now expressed worry about how the employer mandate to provide insurance may harm businesses, including his own.

Burdensome Mandate

In an interview with The Seattle Times in March, Schultz responded to a question about health care costs saying that the cost for Starbucks in 2010 was roughly $250 million.

“We have faced double-digit increases for almost five consecutive years with no end in sight. So when I was invited to the White House prior to health care being reformed, I was very supportive of the president’s plan, primarily because I felt it was literally a fracturing of humanity for almost 50 million Americans not to have health insurance,” Schultz said.

While acknowledging the need for people to be insured, Schultz said the mandates within the law would pose a heavy burden.

“I think as the bill is currently written and if it was going to land in 2014 under the current guidelines, the pressure on small businesses, because of the mandate, is too great,” Schultz said.

Harms Businesses, Employees

Beverly Gossage, director of HSA Benefits Consulting, agrees the mandates will be harmful.

“The government will dictate the type of plans offered, usually raising the cost of the plans. An extra layer of accountability is added as the business must determine the ‘family’ incomes of its employees to calculate if they qualify for subsidies,” Gossage said.

“Businesses must interface with the federal government for reimbursement for these subsidies. Companies must make certain their plan offerings meet the ever-changing government guidelines. Companies like Starbucks with a revolving door of employees will have to hire extra HR staff to keep up with all the tracking and paperwork,” she added.

Supporters Turning Away

Christie Herrera, director of the Health and Human Services Task Force at the Washington, DC-based American Legislative Exchange Council, says Schultz is not alone in his concerns.

“Starbucks CEO Howard Schultz is just the latest in a string of about-faces from health law supporters. What Howard Schultz is realizing now is something that we’ve known from the start: The so-called Affordable Care Act will cripple small business growth,” Herrera said.

“Businesses should be focused on employing our workforce and growing our economy, not worrying about mandates from the federal government,” Herrera added.

Advocating Portability

Gossage suggests a different course for Starbucks.

“For businesses like Starbucks who care about their employees’ access to health insurance, they could accomplish a win-win by doing the following: Lobby to repeal Obamacare, then increase their employees’ salaries by the amount paid for their health insurance benefit, less any tax deduction difference lost from going from benefit to salary,” Gossage said. “This allows the employees to have expendable cash to go to the open market and buy a private policy just like they do now for auto, home, and renter’s insurance.”

Gossage points out moving to a private policy would give employees a portable solution—if they leave their job at Starbucks, they don’t lose their insurance.

“Employees get more plan choices, more affordable options, fewer worries. They can’t be kicked off a plan because they get sick, and their rates can’t be raised due to their personal claims,” Gossage said. “Employers can drastically reduced HR staff, have no hassles with dealing with COBRA, carriers, TPAs, and claims issues, and will find it easier to budget the cost of hiring an employee while providing more competitive salaries.”

Employee Flexibility

Gossage says empowering these younger workers to enter the marketplace, will give them more flexibility while benefiting the employer’s bottom line.

“Employees today, particularly younger workers like Starbucks generally has, are more mobile and want a portable policy,” Gossage said. “They don’t like their employer or the government selecting their health insurance package any more than they want them to pick their cell phone package.”

Sarah McIntosh, Esq. (mcintosh.sarah@gmail.com) is a constitutional scholar writing from Lawrence, Kansas.

 

Vermont’s Sanders Renews Push for Federally Funded Day Care, Preschool

Written By: Sarah McIntosh

Published In: School Reform News

Publication date: 05/16/2011

Publisher: The Heartland Institute

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In the face of a $1.6 trillion federal budget deficit, a national debt topping $14 trillion, and with Congress debating a plan to cut spending by $6 billion over the next decade, one U.S. lawmaker is proposing a new program entitling parents to federally funded universal preschool and childcare.

The “Foundations for Success Act” by Sen. Bernie Sanders (I-VT) would allow the subsidy to start when a child reaches just six weeks of age.

Sanders’ bill would begin as a pilot program in 10 states and eventually expand nationwide. States would compete for federal grant money and establish standards, in a process Sanders compares to President Obama’s “Race to the Top” program for K-12 schools.

“As we struggle to recover from the worst economic crisis since the Great Depression, too many American children do not receive the high quality early care they need,” Sanders said in a statement. “The best way to both address our educational shortcomings and strengthen our economy over the long term is to invest in our children as early as we possibly can.”

The Congressional Budget Office has not estimated the cost of Sanders’ proposal. The federal government spent more than $7 billion in 2010 on the Head Start preschool program for at-risk and inner-city youth.

‘One-Size-Fits-All’ Criticized
The federal government should refrain from meddling in preschool, says Lisa Snell, director of education and child welfare studies at the Reason Foundation in California.

“The state already has an uneven track record with K-12 education,” she said. “Right now there are many different kinds of preschool programs, and parents have many choices. If the state offers free preschool, it [will be] difficult for private and nonprofit preschools to compete.”

While noting Sanders’ bill promotes ostensibly competitive grants, Snell said the government has a tendency to overshadow all other options.

“We risk diminishing parent choice and creating a one-size-fits-all public preschool,” she said.

Snell also warned Sanders’ bill would create a needless, redundant program.

“We should not be using scarce taxpayer dollars to start new federal preschool programs,” she said. “If this kind of preschool is a federal priority, we should use resources from existing preschool programs like Head Start rather than developing new government programs that duplicate programs that already exist.”

The United States has already made a multibillion-dollar yearly investment in early education at the federal, state, and local levels, Snell said. More than 75 percent of four year olds are already enrolled in public and private preschool programs, “and yet we have not seen large-scale academic improvements from this huge investment in early education.”

‘Flat Outcomes’
“On multiple measures from graduation rates to the performance of 17-year-olds on the National Assessment of Education Progress, we have seen flat outcomes and little improvement from this long-term investment,” Snell said.

Multiple studies of Head Start, which President Lyndon Johnson helped establish as part of his War on Poverty in 1965, have shown weak outcomes or no change at all despite the program spending more than $150 billion over four decades, Snell said. A U.S. Department of Health and Human Services study published last year found “few significant differences” in academic outcomes among first graders who participated in Head Start and those who did not.

The weight of research argues against Sanders’ bill, said John LaPlante, a fellow with the Minnesota Free Market Institute.

“If state-funded preschool has a weak record, then it’s a waste of money that could be better used elsewhere—paying teachers better, giving students scholarships for private schools, whatever,” he said.

Government-funded preschool, LaPlante said, is “an instance of government crossing the line between the political culture and the philanthropic one. It’s based on the assumption that government intervention can ameliorate the problems faced by children from less-than-ideal family situations.”

“Private, community-based efforts can make a difference, but even then there are limits to what we can do to fix human problems,” he said. “The problem is more serious once you bring in government, which involves politicians and bureaucracies.”

Appeals to Middle Class Parents
Preschool is a popular cause because voters see it as “‘doing something’ for children,” LaPlante said.

“There’s widespread agreement that kids are not getting the education they need in today’s world, and it’s easier to add something onto the K-12 industry than to make fundamental changes to it,” he said.

Making preschool a universal rather than targeted program is also an obviously political move, LaPlante added, because “any time you open a new spending stream to the middle class, you’re going to boost its political support.”

Several states such as Florida, Colorado, and Missouri have, however, made significant progress with reforms focused on elementary and secondary schools, LaPlante said.

“Florida has taken a multipronged approach,” he said. “They give letter grades to schools, which shames the poor-performing ones and praises the high-achieving ones. They’ve created some school choice programs, and they’ve made some changes in curriculum. They’ve also invigorated the teaching staff by creating one of the leading programs in the nation for alternative paths to getting a teaching certificate.”

As a result, LaPlante said, Florida has experienced impressive improvements in student achievement and significant gains in closing the achievement gap, especially among Hispanic students.

“This record suggests that we benefit when government focuses on reforming its own programs, and enlisting the power of private choice, rather than replacing parents,” he said.

Sarah McIntosh (mcintosh.sarah@gmail.com) is a constitutional scholar writing from Lawrence, Kansas.

 

Jindal Joins Other Governors in Declining to Set Up Health Care Exchange

Written By: Sarah McIntosh

Published In: Health Care News > June 2011

Publication date: 05/19/2011

Publisher: The Heartland Institute

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Louisiana’s Republican Governor, Bobby Jindal, has announced his state will not create a health insurance exchange mandated by the Patient Protection and Accountable Care Act.

Confirming an earlier report in Health Care News, Gov. Jindal’s press office released a statement on the anniversary of Obamacare’s passage indicating the governor would be directing the state government not to implement an exchange. PPACA requires every state to submit a plan for their exchange to the Department of Health and Human Services by January 1, 2013.

“Obamacare is a terrible policy that needs to be repealed and replaced. It creates enormous new costs and future unfunded liabilities for states financing their Medicaid programs,” Jindal press secretary Kyle Plotkin said in a statement.

Not Alone in Opposition

Other Republican governors, such as Nathan Deal in Georgia, Susana Martinez in New Mexico, Rick Perry in Texas, and C.L. “Butch” Otter in Idaho, have announced opposition, vetoed bills, or issued executive orders as ways to prevent implementation of a health exchange.

Florida’s governor, Rick Scott, also a Republican, has stood adamantly against the exchanges. Scott has spoken out against Obamacare from the start and first became a candidate after his strong opposition to the legislation.

John Graham, director of health care studies at the California-based Pacific Research Institute, points out both Jindal and Scott have backgrounds in health care. Jindal was Louisiana’s state secretary of health before becoming governor, and Scott helped run one of the world’s largest health care providers.

“I believe that they learned—correctly—that anti-Obamacare state politicians should not be collaborating in Obamacare in any way. There is no way for a state to put ‘market-friendly’ elements in a state-based exchange,” Graham said.

Some Republicans on Board

Not all governors are standing with Jindal and Scott, however. Mississippi’s governor, former Republican Governors Association chairman Haley Barbour, has publicly announced support for an exchange, and Virginia Gov. Bob McDonnell has supported an exchange law, albeit with restrictions against payments for abortions.

That is shortsighted, Graham says. “The federal Obamacare legislation states very clearly that state laws which establish exchanges cannot impose rules that differ from the U.S. Secretary of Health and Human Services’ regulations, which will change through time,” Graham said. “If the Supreme Court finds Obamacare constitutional, it means that the Supremacy Clause will give the Secretary the power to nullify state law.”

Graham said governors and legislators who oppose PPACA have several other options to defy the mandate, as well.

“States have more power to resist Obamacare exchanges than they believe, because the federal law also states that the Secretary can only allow health plans to participate in an exchange if they are licensed and in good standing with the state,” Graham notes. “This gives state legislators and insurance commissioners a lot of leverage over the health plans that are right now lobbying to establish exchanges.”

Sarah McIntosh, Esq. (mcintosh.sarah@gmail.com) is a constitutional scholar writing from Lawrence, Kansas.

 

Louisiana Joins Eight Other States Seeking MLR Waivers

Written By: Sarah McIntosh

Published In: Health Care News > June 2011

Publication date: 05/05/2011

Publisher: The Heartland Institute

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Louisiana is the most recent state to seek a waiver from the medical loss ratio (MLR) requirements in President Obama’s health care law from the U.S. Department of Health and Human Services.

The MLR is the amount of the premiums spent directly on medical costs. Under Obamacare, individuals and those in small group markets must have an MLR of 80 percent. If not, the insurer is required to reimburse the insured for the additional amount.

Devon Herrick, a senior fellow at the National Center for Policy Analysis, notes that the 80 percent MLR is higher than most insurance companies can afford. Some states are worried insurers will simply drop out of the market.

“Proponents of MLR regulations believe they can force insurers to spend premiums largely on medical care rather than executive salaries, marketing, and overhead,” said Herrick. “The unanticipated result is insurers dropping out of certain markets and lessening of incentives to hold down medical spending. For instance, an insurer runs the risk of efficiently managing medical expenditures only to have to rebate premiums to policyholders.”

“An example of this is efforts to reduce fraud. Fraud detection is considered overhead, while funds spend on fraudulent medical bills would be counted as medical care,” Herrick noted.

Follows Other States

Louisiana’s request notes the state’s reading of Obamacare “raised concerns that there may be unintended yet harmful provisions included.”

“These provisions will, if implemented as written, be disruptive and detrimental to Louisiana’s market,” the request stated in part. “As currently proposed, implementing the 80% loss ratio in the individual market will act to decrease consumer choice, make coverage more expensive and less readily available, and work to drive valuable trained producers out of the market just when they are needed most.”

The other states that have requested waivers include Maine, where a waiver to a 65 percent level was issued; New Hampshire, which is in the public comments stage; Nevada, Kentucky, Florida, Georgia, North Dakota, and Iowa—as well as the territory Guam—all of which are under review by HHS, with public comments pending.

Study Examiness Impact

The American Journal of Managed Care recently issued a report on impact of the MLR requirements on the individual health insurance market.

Under Obama’s new MLR definition, “we estimated that 29% of insurer-state observations in the individual market would have MLRs below the 80% minimum, corresponding to 32% of total enrollment” as of 2009, the report found.

“Nine states would have at least one-half of their health insurers below the threshold,” the study noted. “If insurers below the MLR threshold exit the market, major coverage disruption could occur for those in poor health; we estimated the range to be between 104,624 and 158,736 member-years.”

Waivers Make Sense

Kevin Kane, president of the Pelican Institute in Louisiana, says the waiver request makes sense.

“This is a good move in that it increases the likelihood that insurers will remain in Louisiana, providing consumers with a wider array of options,” Kane said. “The fact that states are requesting waivers puts the lie to President Obama’s claim that people would be able to keep their current insurance policies. How do you keep your policy if the company you have been doing business with exits your state?”

“Fortunately, Louisiana policymakers have been pushing back against ObamaCare,” said Kane. “The state should aggressively seek opportunities to get more control over this costly failure.”

Herrick says it’s wise for Louisiana to pursue this course, but he notes it’s only a temporary fix.

“It makes sense for Louisiana and all states and companies to apply for waivers,” Herrick said. “But most waivers are only good for a year at a time, so the solution is only a temporary one. I don’t believe backers of Obamacare realized how much the new regulations would create upheaval in the insurance market. Without waivers, several million people could find themselves without health coverage. “

“The market does a better job of deciding how companies should allocate their resources than a group of Washington bureaucrats,” said Herrick.

Sarah McIntosh, Esq. is a constitutional scholar writing from Lawrence, Kansas (mcintosh.sarah@gmail.com).

Internet Info:

The American Journal of Managed Care: “Regulating the Medical Loss Ratio: Implications for the Individual Market”: http://www.ahipcoverage.com/wp-content/uploads/2011/03/AJMC-MLR-Paper.pdf