RILA Opposes House Health Reform Bill but Remains Committed to Meaningful Reform

Arlington, VA - 11/5/2009

After months of cooperative dialogue with House lawmakers, the Retail Industry Leaders Association (RILA) spoke out today against House health reform legislation citing substantial employer and employee cost increases and other changes harmful to job creation and job retention. RILA will continue working constructively with lawmakers as the process moves forward to achieve the goal of fundamental health care reform that addresses the unsustainable cost increases faced today.

In a letter to House leaders RILA Senior Vice President for Government Affairs John Emling wrote “RILA and our member companies have been supportive of fundamental health care reform with the hope that it would address the unsustainable annual cost increases we currently experience, while preserving our ability to design and offer health benefits to meet the needs of our employees. Unfortunately, we find that H.R. 3962 could actually increase costs beyond those imposed by the status quo while erecting barriers to the hiring and maintenance of a healthy and productive workforce.”

RILA its member companies have a proven record of providing quality, affordable health care to their employees and will continue to work with lawmakers to craft meaningful reform legislation that will protect their ability to continue doing so.

“While we have major concerns with the House bill, RILA will remain engaged in the process in the hopes that we can work to resolve our concerns and ultimately support a meaningful health reform package,” added Emling.

The letter, addressed to Speaker Nancy Pelosi, objected to four harmful once size fits all provisions included in the House measure that would cause considerable harm to retailers ability to continue offering quality affordable health benefits to their employees.

Among the issues identified are mandated benefit subsidy thresholds which would increase costs for employers and benefit enrollees; mandated coverage for part-time employees, who today largely decline to enroll in coverage offered; Immediate automatic enrollment of new employees, a provision that would be particularly harmful to high turnover industries; and the broad expansion of obligations for ERISA plans, a provision that undermines the fundamental premise of ERISA.

The letter also identified several important reforms missing from the House measure that would help reduce cost and expand coverage to more Americans.

“Retailers look for innovative and cost effective efficiencies on a daily basis in every facet of our business operations, from offering health benefits to providing wellness and prevention programs. Congress has an opportunity to do the same while also reducing systemic costs by enacting meaningful medical malpractice reform, allowing for interstate competition of health insurance, encouraging individual responsibility and expanding the use of medical technologies such as electronic medical records and e-prescribing. Unfortunately, rather than encourage these approaches, H.R. 3962 expands upon programs that have already proven to be inefficient and, therefore, more costly. This is simply unacceptable and Congress must seize this moment to enact meaningful and proven reforms that reduce systemic costs,” added Emling.

RILA is the trade association of the world’s largest and most innovative retail companies. RILA members include more than 200 retailers, product manufacturers, and service suppliers, which together account for more than $1.5 trillion in annual sales, millions of American jobs and operate more than 100,000 stores, manufacturing facilities and distribution centers domestically and abroad.

Full Letter Text Below

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November 4, 2009

The Honorable Nancy Pelosi

Speaker

United States House of Representatives

Washington, D.C. 20515

Dear Speaker Pelosi:

On behalf of the Retail Industry Leaders Association’s (RILA), the premiere trade association for the nation’s largest and most innovative retailers, I am writing to express our opposition to the Affordable Health Care for America Act (H.R. 3962).

Since the outset, RILA and our member companies have been supportive of fundamental health care reform with the hope that it would address the unsustainable annual cost increases we currently experience, while preserving our ability to design and offer health benefits to meet the needs of our employees. Unfortunately, far from accomplishing this goal, we find that H.R. 3962 could actually increase costs beyond those imposed by the status quo while erecting barriers to the hiring and maintenance of a healthy and productive workforce. Not only will the House legislation make health insurance more expensive and drive many Americans out of the plans that they now favor, but we believe that it will undermine job growth and threaten job retention at a critical time in our economic recovery.

While we have major concerns with the House bill, RILA will remain engaged in the process in the hopes that we can work to resolve our concerns and ultimately support a meaningful health reform package.

Specifically, retailers are most concerned about the following four provisions of H.R. 3962:

1) Health plans must be affordable for both employers and employees. If the cost burden becomes too onerous for companies to continue offering health benefits, they will drop coverage, forcing employees to leave the plans that they now have and like. Establishing arbitrary thresholds for how much a plan must be subsidized (i.e., 72.5% for individuals and 65% for families) risks not only increasing costs for many employers but also decreasing plan innovation, flexibility and design. A subsequent penalty assessment equal to 8% of payroll for falling even slightly below these standards could serve as a further disincentive for employers to continue offering health coverage.

Additionally, the most effective way to contain cost is to identify and build upon system efficiencies that have proven to work. Retailers look for innovative and cost effective efficiencies on a daily basis in every facet of our business operations, from offering health benefits to providing wellness and prevention programs. Congress has an opportunity to do the same while also reducing systemic costs by enacting meaningful medical malpractice reform, allowing for interstate competition of health insurance, encouraging individual responsibility and expanding the use of medical technologies such as electronic medical records and e-prescribing. Unfortunately, rather than encourage these approaches, H.R. 3962 expands upon programs that have already proven to be inefficient and, therefore, more costly. This is simply unacceptable and Congress must seize this moment to enact meaningful and proven reforms that reduce systemic costs.

2) Part-time employees should be exempted from any employer mandate. Part-time employees are often individuals with access to insurance through a spouse or partner simply working for extra income, students on their schools’ or parents’ health plans, or retirees with access to Medicare. In fact, of service sector employers who currently offer health care benefits to part-time employees, the typical take-up rate is often less than 20 percent. Therefore, mandating that health benefits be provided to part-time employees may result in the hiring of fewer entry-level and low-wage workers as employers seek to mitigate the costs of offering benefits to a population of employees with 100% or more annual turnover. Further, because H.R. 3962 does not provide a definition of full-time and part-time employment, an issue of significant concern for our industry where it is common for employees to work varying hours week-to-week, we are concerned that this uncertainty will lead to an unnecessarily difficult rulemaking process and possibly litigation.

3) A 90-day waiting period is essential for seasonal and temporary hires. Many seasonal and temporary workers enter the retail workforce with no intention of staying to make a career. For instance, as the winter holiday shopping season approaches, individuals will seek out seasonal retail jobs to earn added money or take advantage of employee discount reward programs. A requirement to enroll these individuals in health benefit plans would dramatically and needlessly increase associated administrative costs, ultimately increasing the cost of benefits for those who make their careers at our companies and putting health care out of reach for even more Americans. A minimum of a 90-day waiting period before employers are required to automatically enroll full-time employees without penalty intohealth benefit plans is vital to ensure that quality, affordable employer-sponsored benefits are maintained for millions of Americans working in service sector jobs. Furthermore, it is not clear that the current 30-day employee opt-out provision addresses any of these critical points. This period is simply too short to negate substantive administrative costs and concerns. Moreover, it appears that an employee can opt-in from the first day on the job, effectively rendering useless the notion of a 30-day waiting period.

4) HR 3962 will dramatically increase costs and reduce plan options by expanding obligations for ERISA plans. Arequirement that employers offer an “essential benefits package” undermines the fundamental premise of ERISA, which is to allow employers the opportunity to tailor benefits to meet the specific needs of their workforces. Not only does

this risk a further increase in costs as employers and employees are forced to pay for benefits they may not want or need, but this provision also appears to eliminate the ability of ERISA plans to offer high deductible health plans. These plans are immensely popular with younger, healthier employees who may already be more inclined to pay the tax penalty for not having insurance than purchase their employer’s health plan, fundamentally missing the goal of this legislation to increase—not decrease—insurance plan take-up rates. Finally, beyond the benefits prescribed in H.R. 3962, the bill also empowers a new bureaucracy to impose future plan requirements in the form of a new Benefits Advisory Committee. The risk of such an agency is that benefit decisions will be based on political whim, not sound science or practical workforce needs, making it difficult for employers to plan ahead each year. Employers must retain the ability to design and offer benefits that address the particular needs of their employees.

RILA and our member companies believe that covering the uninsured and lowering the cost of care for everyone is urgently needed. While we are in the unfortunate position of having to oppose the bill before you, we remain hopeful that the Senate product will address the specific concerns of the retail industry and that Congress will ultimately pass meaningful health care reform that we can support.

Sincerely,

John G. Emling

Senior Vice President, Government Affairs

Brian Dodge
SVP, Communications & State Affairs
Phone: 703-600-2017
Email: brian.dodge@rila.org