The Public Health Option and Lessons from the San Francisco Experiment

Medical_symbol2 As I prepare to provide brief commentary on various legislative provisions for a CCH publication that will explain health care reform legislation once it is finalized, I could not help but take notice of this important op-ed. It is by a trio of labor and health economists that ran in the New York Times this weekend on the much discussed public option and its relations to employers being mandated through a pay or play system to provide health insurance for their employees.

Here’s a taste:

TWO burning questions are at the center of America’s health care debate. First, should employers be required to pay for their employees’ health insurance? And second, should there be a “public option” that competes with private insurance?

Answers might be found in San Francisco, where ambitious health care legislation went into effect early last year. San Francisco and Massachusetts now offer the only near-universal health care programs in the United States . . . .

[W]e have seen how concern over employer costs can be a sticking point in the health care debate, even in the absence of persuasive evidence that increased costs would seriously harm businesses. San Francisco’s example should put some of those fears to rest. Many businesses there had to raise their health spending substantially to meet the new requirements, but so far the plan has not hurt jobs . . . .

So how have employers adjusted to the higher costs, if not by cutting jobs? More than 25 percent of restaurants, for example, have instituted a “surcharge” — about 4 percent of the bill for most establishments — to pay for the additional costs. Local service businesses can add this surcharge (or raise prices) without risking their competitive position, since their competitors will be required to take similar measures. Furthermore, some of the costs may be passed on to employees in the form of smaller pay raises, which could help ward off the possibility of job losses. Over the longer term, if more widespread coverage allows people to choose jobs based on their skills and not out of fear of losing health insurance from one specific employer, increased productivity will help pay for some of the costs of the mandate.

In case you think this is all a bunch of liberal, Democratic mishigosh, one of the authors of this op-ed happens to be non-other than William Dow, a senior economist who worked for President George W. Bush’s Council of Economic Advisers.

In other words, increasing evidence is out there that health care reform with a public option and an employer pay or play mandate might be just what our system needs to rein in health care costs while at the same time providing health insurance to a much larger segment of American society.

[Cross-posted on Workplace Prof Blog]

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Don’t Call It A Comeback: 401(k) Here and Here to Stay

401K_2 With apologies to LL Cool J for the title of this post, CNNMoney has a report entitled: 401(k) Contributios Make a Comeback:

For the first time in a year, more workers increased the amount of money they put into their 401(k) accounts during the second quarter than decreased their contributions, according to a report issued Wednesday by a retirement fund manager.

Boston-based Fidelity Investments, which manages retirement savings plans for 11.2 million workers, said participants decreasing contributions had outnumbered those raising them for the previous three quarters — a period during which all the major stock indexes hit multi-year lows. The vast majority of workers did not alter their contributions in the quarter.

Two points. With the automatic enrollment features of the Pension Protection Act of 2006, this is not a surprise. The PPA automatically opts workers into their employers’ 401(k) plans. If a worker does not want to contribute to their individual pension account, they have to affirmatively opt out.  The laws of inertia and the laws-of-not-knowing-what-in-the-world-is-going-on, tell us that not only will more workers be enrolled in these 401(k) plans, but they will be putting more money in also. Why? Because Qualified Default Investment Alternatives (QDIA) that their employers put them into for 401(k) purposes assure that people who would otherwise not participate or participate at a low level will do so at a higher level if they don’t indicate any preference. This is because these QDIA default investments not only diversify their investments, but also contribute a higher perecentage of income into these accounts.

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The Blue Pencil Comes to Wisconsin

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In a fairly significant ruling in state employment law, the Wisconsin Supreme Court expanded the circumstances under which an employee covenant not  to compete will be enforced in Wisconsin.

Previously,covenants had to not only be reasonable and necessary to be enforced (under Wis. Stat. § 103.465, non-compete agreements are lawful only if the restriction is “reasonably necessary for the protection of the employer”), but all provisions of the covenant had to meet those requirements.  In other words, Wisconsin judges could not “blue pencil” out the offending, unreasonable part of the covenant, and had to hold the entire document unenforceable.   Now, after the decision in Star Direct v. Dal Pra, 2009 WI 76 (WI. July 14, 2009), the blue pencil exists for judges to save otherwise unenforceable covenants not to compete.

Here is an excerpt on the case from the State Bar of Wisconsin website:

The Wisconsin Supreme Court adopted on July 14 new standards that tend to save contracts aimed at preventing ex-employees from competing with their former employers.

In Star Direct v. Dal Pra, 2009 WI 76, the court announced that portions of a restrictive covenant may be enforced even after another section is deemed unenforceable, so long as the surviving provisions remain understandable and capable of independent enforcement.

Dissenting justices criticized part of the majority’s analysis for assuming that a court signals approval of issues it could have addressed, but did not. The dissent warned that this new interpretative tool defies precedent and judicial restraint.

So, ladies and gentlemen of the Wisconsin judiciary, blue pencils out!

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