[Congressional Record Volume 140, Number 84 (Tuesday, June 28, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: June 28, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
 WALL STREET JOURNAL ARTICLE ``ADVANTAGES OF EMPLOYER HEALTH PLANS ARE 
                             DISAPPEARING''

                                 ______


                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                         Tuesday, June 28, 1994

  Mr. STARK. Mr. Speaker, Members' offices are getting lots of mail 
urging that companies of any size continue to be allowed to self-insure 
the health of their workers.
  There is another side to company managed self-insured health plans. 
The following article from the June 17, 1994 Wall Street Journal spells 
it out.

          Advantages of Employer Health Plans Are Disappearing

                         (By Ellen E. Schultz)

       Employees who have health coverage in the workplace usually 
     consider themselves more fortunate than people who have to 
     buy individual coverage on their own.
       After all, they believe, group coverage is always cheaper, 
     and they are automatically covered, regardless of their 
     health problems. Right?
       Not necessarily.
       What few employees realize is that the difference between 
     individual coverage and employer-provided group coverage has 
     eroded profoundly during the past few years. Not only have 
     most of the advantages of group coverage largely disappeared, 
     but many employees risk losing not only their coverage, but 
     their jobs. In the past, all a person had to do to join an 
     employer's health plan was to fill out a form. All employees 
     were in the same ``pool,'' and all paid the same costs, 
     regardless of health.
       But as medical costs have climbed, employers have begun 
     abandoning their own version of universal coverage (for their 
     employees) and started adopting the same practices used by 
     insurance companies when people apply for individual 
     policies.


                        identifying health risks

       Like health insurers, more and more employers are engaging 
     in ``underwriting,'' which is the process of identifying the 
     current and potential health risks of their employees. This 
     usually involves requiring employees to take blood, drug, and 
     urine tests, and a physical exam. In many cases, individuals 
     are required to provide information about a family history of 
     such things as heart disease, cancer and genetic disorders.
       Many employers also ask about off-duty behavior, such as 
     whether the employee rides a motorcycle, wears a seatbelt, 
     participates in sports, has a happy marriage or gets enough 
     sleep.
       The employers use this information the same way insurers 
     do: to exclude pre-existing conditions, to deny coverage or 
     to charge higher premiums.
       ``Insurance companies for years have identified risks and 
     charged more for them. The practice is just now finding its 
     way to employers' group-health plans,'' says Kenneth 
     Sperling, heath-care consultant for Hewitt Associates, in 
     Rowayton, Conn.


                              saving money

       And no wonder. Underwriting by private employers is saving 
     the companies billions of dollars by reducing claims. Those 
     that buy coverage from insurance carriers pay lower premiums 
     if they have fewer claims. Meanwhile, if the employer is 
     self-insured, as are about 75% of large employers, each 
     dollar saved is a dollar earned. And self-insured or not, all 
     but the smallest employers must pay workers compensation 
     premiums, which are lower if injuries are fewer.
       A survey of 461,208 employees at private companies shows 
     that 31% of employees had no medical claims, and another 50% 
     had claims of less than $1,000. Another 14% of employees had 
     claims ranging from $1,000 to $5,000.
       The survey was conducted at the request of The Wall Street 
     Journal by Medstat Systems, a medical-information firm in Ann 
     Arbor; Mich. The survey was of a random sample of claims 
     filed in 1991 by employees and dependents at self-insured 
     companies in Medstat's proprietary database of more than 100 
     of the largest U.S. employers. Of the 461,208 employees, only 
     32 had big-ticket claims greater than $300,000.
       ``It's no secret that private employers `cherry pick' 
     healthier individuals using underwriting practices,'' says 
     Arthur Caplan, director of the Center for Bioethics at the 
     Universify of Pennsylvania


                       requiring more information

       One way that employers are able to keep claims so low is 
     that they can be more aggressive than health insurers in 
     their underwriting practices. ``The private sector can weed 
     out claimants in the underwriting process with more impunity 
     than any other provider of health insurance,'' says Dr. 
     Caplan.
       For one thing, they can force employees to provide far more 
     information about their health and personal lives--as a 
     condition of employment.
       ConAgra Poultry Co. in Longmont, Colo., requires employees 
     of the ConAgra Inc. unit to tell it what prescription and 
     over-the-counter medications they are taking and to sign 
     releases giving the company complete access to their medical 
     records.
       When benefits clerk Carmella Mares refused, she was fired. 
     A spokesman for Con-Agra says the company needed the 
     information to ensure the accuracy of its drug testing and 
     has no further comment.
       Mrs. Mares, who as a Navy reservist is often randomly 
     tested for drugs, says she was willing to take a drug test. 
     But she thought the company was going too far, and sued. Says 
     the former nun: ``It's the principle of the thing.'' However, 
     in late 1992, a federal appeals court in Denver ruled that 
     employers can require employees to provide medical 
     information.
       ``What makes this case extremely troubling is it's the 
     first time the courts have upheld the employer's demand that 
     an employee reveal the nature of their private illnesses,'' 
     says Gilbert Roman, a lawyer in Denver with the American 
     Civil Liberties Union. ``It sets a dangerous precedent--that 
     any employee can be fired if they refuse to turn over their 
     medical records.''


                          power to hire, fire

       In addition to compelling employees to provide more health 
     information, employers can be more aggressive than insurers 
     when it comes to shaping their ``risk pools'' because they 
     have the power to hire and fire.
       For example, Lockheed Aeronautical Systems Co., a 
     subsidiary of Lockheed Corp. in Marietta, Ga., recently 
     announced it wouldn't hire smokers. Turner Broadcasting 
     System Inc. in Atlanta hasn't hired smokers since 1986.
       Thirty percent of occupational physicians who responded to 
     a survey by the University of Chicago's hypertension clinic 
     said their companies wouldn't hire someone with high blood 
     pressure. ``I was surprised by the ubiquity of the responses 
     and the arbitrary nature of how it was used,'' says Dr. 
     Michael B. Murphy, a professor of clinical pharmacology, now 
     at University College in Cork, Ireland, who conducted the 
     survey.
       The findings are similar to a report by the U.S. Congress 
     Office of Technology Assessment in 1991, in which 42% of the 
     companies surveyed considered a job applicant's health-
     insurance risks as factors in determining their 
     employability. Further, more than half of the personnel 
     executives interviewed considered it acceptable to use pre-
     employment health exams to identify applicants who might be 
     medically expensive.
       It also is routine for employers to screen job applicants 
     to see if they have had workplace injuries. Sixty-four 
     percent of employers surveyed by benefits consulting firm 
     Tillinghast Inc. said they use pre-employment screening of 
     workers' compensation claims.
       While the Americans with Disabilities Act makes it 
     generally illegal for employers to consider an employee's 
     health as a condition of employment, it is virtually 
     impossible for a job applicant to know whether the 
     prospective employer considered health information, which is 
     widely available in databases and often in personnel files.
       The consequences of this trend are that as private 
     companies seek to hire younger, healthier employees with 
     healthy dependents, those who are older, sicker, and have 
     children with medical or emotional problems will find 
     themselves clustered at nonprofit and government jobs, or at 
     smaller businesses that have no coverage. ``There's been a 
     lot of traffic of higher risk employees from the private 
     sector into public-sector jobs,'' says Dr. Caplan.
       Even healthy employees are affected by the underwriting 
     process. Virtually all employers hire benefits consulting 
     firms and medical cost-containment companies to analyze the 
     claims filed by employees, to tell employers what types of 
     claims are costing the most money.
       Armed with this knowledge, employers are shifting more 
     costs to employees, by redesigning their benefits packages to 
     increase co-payments and deductibles.
       They also are restricting access to care, by excluding pre-
     existing conditions and other conditions, and by introducing 
     caps on coverage. For example, employers with many 
     professional married employees in their 30s and 40s are 
     dropping fertilization treatment and capping what they pay 
     for Caesarean deliveries.
       Further, many employers are creating different risk pools 
     among their employees. Those who smoke, are overweight, have 
     high blood pressure or other health risks pay higher 
     premiums.

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