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By JOEL BERG, who is a college professor and freelance writer

Fear of the unknown was among the factors that sank healthcare reform in the 1990s and ushered in the era of managed care.

Companies, hit by falling sales and declining profits, are having more trouble than ever affording premiums, which continue to rise. Some have been dropping coverage altogether, eroding the employer-based system for providing health insurance.

In 2007, before the recession took hold, 18.4 percent of working adults lacked health insurance, compared to 16.1 percent in 1995, according to a report in March by the Princeton, N.J.-based Robert Wood Johnson Foundation.

"Things are bad enough that the status quo has become the scary proposition," says Judy Feder, a public policy professor at Georgetown University and a senior fellow at the Center for American Progress, a left-leaning think tank in Washington, D.C.

The recession, twinned with the high cost of healthcare, is making a powerful argument in favor of reform, she says. "It has become commonly understood that we need to fix healthcare to fix the economy," says Feder, who was a deputy secretary in the Department of Health and Human Services in the first Clinton Administration.

Still, some observers are skeptical the government can do both at the same time.

Public officials don't seem to have fixed the financial system despite costly efforts, says Mitch Stringer, managing partner of Select Benefits Communications Group, a voluntary benefits communications, enrollment and administration firm in Towson, Md.

"Why would we believe, then, that the government can do a better job at developing or managing a health system?" Stringer says. "There's only so much time and money and attention that can be focused on any one thing."

For now, however, players on all sides of the healthcare debate seem willing to focus. Business lobbies, insurer groups, labor unions and consumer advocates all have expressed a desire for reform.

WHAT GOVERNMENT WOULD DO

The White House and congressional offices have floated a variety of plans. Most would bolster the existing employer-based system by requiring companies, except for small businesses, to buy insurance. Some plans call for a mandate on individuals to buy insurance, with subsidies for those who can't afford it.

Reform plans also include checks on the growth of healthcare spending, considered an essential step for any new effort to succeed. Along those lines, the government is funding programs to boost wellness, shift to electronic health records and study ways to pay doctors and hospitals for making people better, rather than reimburse them solely for the number of services they provide.

"It's been a long time that there's been such an environment ... as conducive to change as what we have today," says Jay Starkman, chief executive officer of AlphaStaff Group, a professional employer organization based in Fort Lauderdale, Fla. "I think that may trump everything else."

The main challenge for reformers is to keep the consensus from fracturing as details are worked out.

Lawmakers, for example, will have to decide what constitutes an acceptable benefits package before mandating that insurers offer it and people buy it. They'll also be weighing the possibility of creating a new government-sponsored insurance plan that would compete with private carriers, a possibility that already has drawn heavy flak.

"There is a legitimate concern that if you start a public healthcare plan, everybody eventually falls in," says U.S. Rep. Joe Sestak, a Pennsylvania Democrat who sits on the House subcommittee on Health, Employment, Labor and Pensions.

Despite the potential minefields, Sestak is optimistic. "Everybody kind of seems to want this reform," he says.

But, he added, everybody must have a say in its design.

"Democrats particularly need to recognize this, because it isn't our day, it's the nation's day," he says. "And if we rupture this and say 'our way or the highway,' it's a repeat of the 1990s. And that's a shame."

Challenges remain even if the consensus holds form and President Obama delivers on his pledge of reforming the system this year. Some observers fear Congress will only reshuffle how people pay for healthcare rather than address the forces that drive up its cost, such as the increasing prevalence of diabetes, heart disease and other chronic ailments.

"The question becomes ... are we going to fix it in a way that makes long-term sense or are we going to fix it in a way that makes short-term, political sense? Those, unfortunately, aren't always the same," says Bob Stone, executive vice president and founder of Healthways Inc., a wellness provider in Nashville, Tenn.

Stone is concerned lawmakers will end up creating a system that does no better than the existing one to keep Americans from getting sick in the first place.

"I'm eternally optimistic," Stone says.

"But the public has been conditioned to focus on 'Am I covered?' and 'When I get sick, does the bill get paid?' When the answers to those questions are 'no,' those become the hot-button political issues."

PAYMENT PLEASE

So far, it is the payment system that has drawn the most attention.

The centerpiece of President Obama's plan is a government-sponsored exchange, or connector, where carriers would offer affordable health plans with a minimum set of benefits. The plans would be available to buyers regardless of health status or pre-existing conditions.

Tax credits would help low-income people afford insurance and persuade small businesses to offer it to their employees. Large companies that don't offer their employees meaningful coverage or contribute meaningfully to its cost might have to pay a penalty, with the terms yet to be decided.

While most proposals aim to reinforce the existing system, specific features eventually might undermine it, says Mike Ferguson, chief operating officer of the Self-Insurance Institute of America, a South Carolina-based trade group representing self-insured employers and their vendors.

Employers, for instance, likely would stop providing insurance if the penalties for doing so were set too low, he says. They would pay up, especially if employees had a government-sponsored plan to fall back on.

While the institute may not like every proposal it has seen so far, it has been approaching the debate with an open mind, Ferguson says.

"I think most organizations are holding some or all of their fire, potentially until some more of the details get fleshed out," Ferguson says.

But even if it becomes open season on a specific plan, critics may have a harder time figuring out where to aim than they did in 1994, when the last major attempt at healthcare reform failed.

The plan developed under former President Clinton presented a relatively stark choice between the existing system and a new government program, Ferguson says.

The complicated nature of the debate today could hamper efforts to voice effective opposition to individual pieces, Ferguson added.

"In the early 1990s, it was a game of checkers," he says. "We're sort of playing a game of chess now."

The debate may have a lot more moving parts. But reform is crucial for small businesses, who view healthcare as their most pressing financial concern, says Michelle Dimarob, legislative affairs manager for the National Federation of Independent Business. The Washington, D.C.-based group has 350,000 members.

"Inaction means the status quo and the status quo for small business just isn't an option," Dimarob says.

Midsize businesses are not far behind in hitting their limits, says Peter Ronza, compensation and benefits director at the University of St. Thomas in St. Paul, Minn. The college employs about 1,500 people. "No employers like this system," Ronza says. "But employers also dread the unknown."

May 1, 2009

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