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NEWS ANALYSIS : Medical Coverage Reform Will Cost Plenty : Health care: The burden is likely to fall on middle-class workers, who could find themselves paying more for less.


WASHINGTON — Many middle-class workers who have good health insurance would lose some of their benefits, face a more restricted choice of doctors and pay higher taxes under the health care reform package being developed by the Clinton Administration.

The White House's twin objectives of cutting expenses while expanding coverage to include all Americans would be carried out by forcing virtually everyone into low-cost health groups. At the same time, workers probably would face a new deduction from their paychecks to generate cash to pay for the uninsured and to subsidize many small businesses and low-wage industries as they begin covering their workers for the first time.

"The middle class may well find itself paying more for health care and getting less," said Gail Shearer, director of health care policy for Consumers Union.

Universal access is costly, requiring billions of dollars to finance coverage for 37 million Americans now without health coverage. This means "taking resources from those who now have insurance and giving it to those who do not," said William Custer, research director for the Employee Benefit Research Institute.

"Somebody will have to pay for it, and the only money available is from the huge middle class," said Richard Berman, executive director of the Employment Policies Institute, representing firms in the food-manufacturing and restaurant businesses, which typically do not provide insurance for their large numbers of part-time and low-wage workers.

A proposal under consideration by the White House would require businesses to pay at least 75% of the cost of coverage, with workers paying the rest.

Under the emerging Clinton plan, corporations, which are now permitted to deduct as a business expense the full cost of all health coverage, are likely to have a new tax cap. They could deduct no more than the cost of the low-priced plan in their area, usually a health maintenance organization, which requires all those enrolled to use a specified list of doctors and hospitals.

Administration health planners advocate managed competition, in which all residents of an area would choose from among five or six providers of care: HMOs or other networks of doctors and hospitals. The tax cap would be fixed at the price of the lowest network certified as providing acceptable care.

In Los Angeles, for example, a company with a rich menu of health benefits might now be spending an average of $4,500 a year for each worker's health insurance. But the low-priced plan might have a cost of $2,000 a year, and this would become the limit for the tax deduction. Companies would immediately switch to the lower-priced plan, and any worker who wanted the more extensive benefits from a $4,500 plan would have to buy additional coverage out of pocket.

Thus, workers at major corporations with costly benefits could find themselves with slimmed-down benefits, just as they were hit with the new, separate health care payroll tax.

Both business and labor are wary of this method of curbing benefits.

"Washington Redskins' tickets are fully deductible as a legitimate business expense, so we strongly oppose any notion of limiting employer deductions for something as important as health insurance," said Kristin Bass, a policy manager for the U.S. Chamber of Commerce.

Businesses with good benefits, including costly programs such as preventive examinations, and "fitness" exercise gyms, "would feel they are being penalized when they are the good guys," Bass said.

From the union point of view, "people gave up pay raises for these benefits" and it would be unfair to lose them because of changes in the tax laws, said Paul B. Worthman, director of research and negotiations for Local 399 of the Service Employees International Union, many of whose 25,000 members in Los Angeles County are health care workers.

Worthman also expressed concern that requiring most workers to pay up to 25% of the cost of health insurance might keep coverage beyond the reach of many working-class families.

Businesses, particularly smaller firms, balk at the Clinton proposal for mandated coverage.

"Anyone who isn't providing health insurance at the moment isn't doing so for one reason, and one reason alone: They can't afford it," said Martyn Hopper, California director of the National Federation of Independent Business, whose members employ an average of eight workers. About 38% of the 50,000 member firms in California do not provide health insurance.

A mandate will be bad "for most of my members," said Barry Rogstad, president of the American Business Conference, a diversified group of fast-growing companies. "If something adds to the cost of hiring workers and doing business, we have to darn well worry about it." Chris Stone, president of a Los Angeles fabric printing and dyeing company, provides health insurance for his company's 225 employees while many of his competitors do not, giving them a cost advantage.

He welcomes a coverage mandate because it "'would give us a level playing field," he said.

However, he warned that small businesses could be crushed by the cost of providing insurance for employees' dependents if such coverage is required under the Clinton plan.

"You could take a look at someone with nine children and say, 'I can't hire him. It would be too costly,' " Stone said.

Rosenblatt reported from Washington and Silverstein from Los Angeles.

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