Key Health Plan Revision Hinted : Insurance: Bentsen says Administration is willing to review 5,000-employee threshold for business. Lowering it would let more small firms opt out of alliances.

WASHINGTON — The morning after President Clinton promised to be flexible on health care reform, the Administration signaled compromise was possible on one central component--the government-organized health alliances.

In a speech Wednesday--one day after Clinton’s State of the Union Address--Treasury Secretary Lloyd Bentsen said that the Administration might allow more businesses to opt out of the mandatory alliances. That compromise would enable more companies to negotiate for health insurance on their own, rather than being forced to choose from among a limited number of plans negotiated by the regional health alliances.

Bentsen’s remarks were made to the National Assn. of Manufacturers and the Assn. of Private Pension and Welfare Plans--organizations that represent big business, a constituency the Administration had hoped would be one of its most powerful allies.

To the dismay of White House officials, that support has not materialized. And while Bentsen’s remarks were well-received, there were no indications of compromise on the leading objection many businesses have to the Clinton plan: the requirement that all employers provide health insurance for their workers. That coverage would be through the alliances or, in the case of the largest businesses, through policies they negotiate independently.

Bentsen suggested Wednesday that the White House would be willing to allow smaller businesses to negotiate their own insurance coverage. Currently, only those with 5,000 or more employees would be exempt from the requirement that they participate in an alliance.

“You think that the 5,000-employee threshold for joining regional alliances is too high,” Bentsen said. “I understand you want it reduced to 500. We hear you. We’re willing to discuss this one and the other details of our plan.”

The formation of health purchasing alliances is a central premise of the Clinton plan. By banding together into alliances, consumers can gain enough strength to negotiate lower prices from health providers, backers of the Administration plan argue.

Under the Clinton proposal, an estimated 70% or more of Americans would have to join the government-established alliances.

Only the largest corporations would be allowed to form their own groups, in exchange for paying a 1% payroll tax to help finance medical research. Smaller firms have complained that they, too, should be allowed to opt out of the alliances, saying they could better control their costs on their own.

Bentsen did not specify how low the Administration would be willing to go in reducing the size of exempt businesses. He cautioned that if firms that are too small are allowed to create their own purchasing groups, it would be impossible to control health industry costs.

If more businesses are allowed to strike their own deals, alliances would lose clout in the marketplace, diluting the pressure they exert in holding down costs.

Bentsen also noted that employees are important members of alliances because they tend to be younger and healthier, which means they have lower health costs.

“Businesses, especially manufacturers, do not go out of their way to hire the sick and elderly,” he said. “To hold down premium costs, it’s critical that the alliances be large enough that the risk can spread.”

But business community analysts argue that even if the threshold size were reduced to 100 employees, roughly half of Americans would still receive coverage through alliances.

The Treasury secretary also told the group that the Administration is sympathetic to complaints by multi-state employers that Clinton’s proposal would subject them to a dizzying array of federal and state regulations and requirements. The manufacturers group has insisted that companies doing business across state lines should continue to operate under uniform federal standards.

Jerry J. Jasinowski, the National Assn. of Manufacturers president, said that Bentsen’s specification of areas where the Administration is willing to compromise was a significant step toward bringing business on board the Clinton plan.

The Administration had hoped that big business would support its plan because most large firms already provide health coverage and have the most at stake in bringing costs under control.

“They all are paying their full freight,” said Sen. John D. (Jay) Rockefeller IV (D-W. Va.), a key Administration ally on Capitol Hill. “They all are carrying everybody else. They all have to gain by this.”

While the firms generally do provide health insurance for their employees, their single biggest objection to the plan is that it would make such coverage mandatory. “The mandate thing is like a religion with them. It’s ideology,” one congressional aide said.

White House officials argue that there is no other politically feasible way to reach the Administration’s overarching goal of coverage for every American--which leaves it far from certain whether the two sides can find common ground on the employer mandate issue.

Another leading feature of Clinton’s plan that is likely to be scaled back, if not scrapped, is one that would have the federal government pay 80% of the health insurance premiums of early retirees until they reach age 65 and become eligible for Medicare. The premiums now are being paid by the retirees’ former employers.

Many business leaders and health care analysts believe the government should not encourage workers to retire early at a time when Americans are living longer and healthier--and the bulging population of baby boomers is approaching age 55.

The early retiree proposal came under criticism Tuesday from the lone Republican senator who has endorsed Clinton’s plan, James M. Jeffords of Vermont. Also speaking at the meeting, he said it is “not right (to create such) a new entitlement program.”

Bentsen was asked about the issue Wednesday but declined comment, saying he was not well-versed on it.

The proposal would be especially beneficial to large and older manufacturing firms that have huge rosters of early retirees, such as the auto companies. Indeed the Big Three auto makers are so concerned the proposal will be abandoned that they are forming a coalition to fight for its retention, sources said.

Rep. Jim Cooper (D-Tenn.), speaking at the same conference, made a strong pitch for his own plan, which has bipartisan support in the House and Senate and resembles the President’s proposals in many ways. But there are a few important differences.

Cooper’s plan does not require employers to provide health coverage, and would allow firms with as few as 100 workers to set up their own health insurance purchasing alliances.