The cost of providing health coverage to employees is one of the most significant challenges facing manufacturers today. In fact, health insurance expenses represent the fastest growing cost component for employers. Manufacturers seek opportunities to continue to provide health benefits to employees as they recognize the competitive value it provides in a demanding market where skilled employees are scarce. However, rising health insurance costs hinder our ability to compete globally, drain resources that could be invested in new technologies and facilities, inhibit the creation of new manufacturing jobs and undermine economic growth across the nation.
Rapidly rising health care costs are only part of the challenge manufacturers are facing. Manufacturers want to attract and retain skilled, healthy and productive employees. We are committed to sponsoring benefit programs that maintain the appropriate balance of quality care, flexible designs and shared financial responsibility. At the same time, the rising costs associated with a growing uninsured population and federal and state entitlement programs—all of which manufacturers share—are threatening our industry’s competitiveness.
Overall Value: The U.S. devotes a much larger share of GDP to health care than other industrialized nations. However, basic quality indicators show that the U.S. does not have the best health outcomes and our medical system is inefficient.
Access & Affordability: The number of uninsured citizens is unacceptable to most. Government, employers and consumers recognize the difficulty in sustaining the current level of expenditures and all stakeholders have a role in ensuring access to affordable, quality health care. Accessibility must be considered in the context of affordability. Simply mandating broad coverage of the uninsured may not make health care more affordable, and thus it may remain inaccessible to some individuals.
Lack of Transparency: Information related to quality and cost is not readily available in a user-friendly format for many key health care stakeholders—employers, government, insurers, consumers and providers. Additionally, employer and consumer-friendly comparative information for various medical treatments and services is largely unavailable.
Promoting Quality and Value: Overly burdensome government intrusion hinders innovation, flexibility and competition based on quality and value. Both federal and state government should promote competition based on quality and value.
Inefficient Processes: Process inefficiency adds costs to any business—including health care. Administrative and medical process inefficiencies lead to duplication of basic patient services and tests, preventable medical errors, lost productivity and decreased patient satisfaction.
Cost Shifting: Both state and federal governments have responded to growing costs by reducing reimbursements to providers and cost shifting to the private sector—actions that exacerbate affordability and access concerns in the private market and are forcing many employers to reduce or cease offering health benefits.
Inefficient Medical Liability System: America’s inefficient medical liability system encourages frivolous lawsuits, unnecessary increases in costs through the use of defensive medicine, higher administrative costs and less access to quality care as physicians relocate or retire.
Principles of a Strong System
Achieving affordable, quality health care coverage is a critical priority for our entire nation, not just U.S. manufacturing. An improved health care system—with greater access to more efficient, higher quality and affordable health care—requires the collaboration of public and private stakeholders and individual consumers. The following principles were developed from the perspective of our members—manufacturers from all industries, who voluntarily seek to improve the employer’s role in the availability and affordability of health benefits to their employees. The NAM urges all manufacturers, suppliers and partners to promote health care reform consistent with our health care objectives and principles. These include:
• Public/Private Partnership: Health care reform should preserve the public/private partnership in delivering medical coverage to American citizens. The federal government should not be the sole provider of health care.
• Private Sector Involvement: The private sector has a strong role to play in creating a system with multi-stakeholder responsibility, including individual responsibility, and ensuring that the right information is available and understandable. Manufacturers have much to share when it comes to efficiency, effectiveness and the economic impact of rising costs. Private sector innovation, efficiencies and fiscal responsibility can help make quality health care available to all employees.
• Product & Process Innovation: Health care reform should support technological innovation in medical, pharmaceutical and medical device treatments, products and processes and promote competition in the private sector.
• Tax Policy: Health care tax policy should continue to promote employer-sponsored health care coverage for employees and their families. The individual tax exemption and employer deduction for employer-sponsored coverage must be maintained.
• Cost Shifting: Government should pay the full costs of health services they provide and not underpay or transfer costs to the private sector.
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The NAM believes that significant improvements to the quality, access and affordability of health care can be gained through a heightened public policy commitment to process improvement and the implementation of a nationwide interoperable health information system. Such a commitment would transform health care from a disconnected and largely paper-based system to an electronically integrated network of patient care ensuring that all health care stakeholders have access to the right information at the right time.
Manufacturers are well positioned to help the health care industry integrate much-needed process improvement techniques and information technology into their operations. U.S. manufacturers have streamlined their internal processes and operations to reduce costs, eliminate errors and improve quality. This process has been essential to maintaining America’s competitive edge. Although the health care sector differs in significant ways from manufacturers, it can and should benefit from process improvement and the application of information technology.
HIT holds the same promise for health care providers as it does for manufacturers in terms of cost savings and quality improvements. However, process improvement initiatives must be coupled with HIT to ensure the full benefits in terms of access, quality and cost containment are realized. In the end, both components—HIT and process improvement—will improve health care access, quality and affordability by better disseminating information in a secure way among the patients, doctors and others empowered to make health-related decisions.
2.01a. The NAM supports a rational approach to deploying a nationwide HIT system that combines the creative energies of both the private and public sectors. An individual’s privacy must be protected and information shared in a secure manner.
2.01b. The manufacturing community can utilize its combined purchasing power and leadership to drive the development of HIT and assist in its implementation. To further this goal, the NAM will support and encourage providers’ efforts to streamline administrative processes and comply with a recognized quality management system.
2.01c. The federal government can help support the development of standards, remove barriers to HIT implementation and utilize its role as a major purchaser of health care services to help drive the adoption of HIT. The NAM supports policies that establish dates certain for creating interoperable standards and deploying HIT, and provide incentives for HIT adoption.
2.01d. The NAM supports physician adoption of electronic prescribing technology to facilitate timely physician prescribing decisions which improve health outcomes, while striving to reduce overall health care costs.
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An informed consumer is an empowered consumer. When it comes to health care, patients—the ultimate consumers of health care services—face obstacles accessing the right information they need about the cost of health services relative to the quality of care or service provided, or the specific and relative benefits of different health plans. A transparent system is aimed at providing all stakeholders ready access to appropriate and relevant information at the right time. This will help promote individual accountability, informed decisions and most importantly, better care and outcomes.
2.02a. A transparent system should include information regarding the quality of performance of providers and cost information of procedures and treatments in an understandable format for consumers, payers and providers in order to achieve better decisions and health outcomes. This information should be understandable and specific to what medical providers, services and treatments are available with related cost-sharing provisions.
2.02b. The NAM supports value-based purchasing (a.k.a. “pay for performance”) programs and other incentive programs that encourage evidence-based medicine and the delivery of high-quality integrated care. These programs should also help consumers make better health decisions. Manufacturers can, and should, demand this information from health networks and providers.
2.02c. Policymakers and manufacturers share an interest in ensuring there is adequate and accurate information to inform health care decision-making. The NAM supports the sharing of new studies and ongoing research that can provide valuable information on the comparative clinical effectiveness of medical treatments and services to patients and their physicians. This research can provide clinical guidance on the most effective and efficient ways to improve quality care, patient outcomes and the overall affordability of health care. Such research should be combined with other information to help physicians and patients make appropriate decisions. Funding for such research must be broad-based and not added to overall employer costs.
2.02d. Access to Medicare data has become increasingly important as employers, insurers and researchers seek to combine Medicare claims data with their own data on individual physicians and other providers to improve the quality and cost measurement of health services. The NAM supports making provider-specific Medicare claims data available to researchers or other appropriate entities for the purpose of developing quality measures and performance reporting.
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NAM members have long been at the forefront of innovation and creativity to solve significant business issues and succeed in this highly competitive global market. We believe this same type of thinking should be applied to the problems facing America’s health care system.members have long been at the forefront of innovation and creativity to solve significant business issues and succeed in this highly competitive global market. We believe this same type of thinking should be applied to the problems facing America’s health care system.
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2.03a. Protecting ERISA
The foundation of employer-sponsored health benefits is the Employee Retirement Income Security Act (ERISA). Today, more than 160 million Americans receive health, retirement and other valuable benefits through their employer under the framework established by ERISA.
ERISA enables employers to maintain uniform benefit plans that meet the needs of employees on a nationwide basis and is critical to preserve if employers are to continue offering high-quality health coverage to their employees.
Any public policy aimed at improving the quality, cost and reach of health coverage must start by protecting the ERISA framework. Protecting ERISA will give manufacturers the flexibility they need to apply the same innovative thinking to health coverage that has powered America's job creation and economic growth.
2.03b. Health Management: Wellness and Prevention and Chronic Care Management
Chronic conditions impact millions of Americans and account for nearly seven of every 10 deaths in the U.S. Treating these chronic diseases is the primary driver of health care costs. Therefore, managing existing chronic conditions and preventing new cases is a key objective for manufacturers.
Studies suggest that an investment in wellness and prevention programs can yield dramatic savings in long-term health costs and improvements in employee satisfaction and productivity. Employers have taken the lead in implementing workplace wellness programs, and report increased job satisfaction, improved morale, reduced absenteeism, higher productivity and lower overall health care costs among employees.
In an effort to reduce health care costs and improve the well-being of employees, the NAM supports policies that encourage and incent both public and private health plans to implement a comprehensive health management approach. Such an approach would include coordinated care, preventative services, behavioral change tools, disease and case management, better assessment of employee health risks and incentives for employees to achieve better health outcomes. The most effective spending of health care dollars is primary and preventative care.
Public policy should support private sector efforts by encouraging employers to treat wellness and prevention as critical components of their overall health insurance benefits packages. This includes appropriate financial and reimbursement incentives to increase the utilization of chronic disease management tools and services.
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2.03c. Flexible Benefit Designs
Flexible financial benefit designs such as Health Savings Accounts (HSAs), Health Reimbursement Arrangements (HRAs) and Flexible Spending Accounts (FSAs) provide additional choices for consumers and empower employees to manage their health expenses while improving access to affordable private health coverage. The NAM supports such designs and other tax-favored funding programs and encourages improvements to enhance flexibility. At the same time, such programs should provide incentives for prevention, wellness and treatment adherence.
The NAM supports end–of-year rollover of unexpended funds or an after-tax payment to employees with Flexible Spending Accounts (FSAs), as well as increasing the annual caps and allowing the use of FSAs for over-the-counter medications. This would reduce the consumption of unnecessary health services and products in order to deplete funds in an individual's account prior to the end of the year.
The NAM supports FSA expansion for individual health insurance coverage, dental coverage and long-term care if the employee does not participate in an employer-sponsored health plan.
The NAM supports increasing the annual contribution limits for HSAs, permitting account owners to purchase health insurance using HSA funds, such as the purchase of over-the-counter medications, permitting greater flexibility in the use of HSAs and utilizing HSA funds to cover expenses incurred prior to the establishment of the account.
2.03d. Promoting the Availability of Safe and Affordable Medical Innovations
Affordability: The NAM supports increased access to affordable medical innovations via a robust and competitive market. This includes relying on the scientific expertise of the FDA to create a regulatory pathway for follow-on biologics, as well as maintaining transparent and predictable processes for the review or approval of medical devices, drugs or biologics.
Price Controls: Efforts to apply price controls to prescription drugs, biologics or devices will result in less medical innovation and the rationing of care. Price controls destroy the ability of manufacturers to fund and conduct research and to innovate. Market forces deliver the best products at the best prices.
Unauthorized Importation of Medical Products: The NAM opposes the importation of drugs, biologics and devices outside the current safety system established by the FDA. Consumer safety should be our paramount public policy concern. Importation and re-importation could expose consumers to counterfeit and adulterated therapies. In addition, it could undermine the public health as well as the reputation of those quality drugs, devices and biologics approved by the FDA for marketing in the U.S.
Innovation: Health care policy must strike a reasonable balance between the need to promote medical innovation, ensure patient safety and encourage competition. The NAM recognizes the cost of developing and manufacturing drug, device and biologic products is significant: billions of dollars in capital, research and development costs are required to bring these products to market. Without an adequate return on investment, such innovative new treatments will never reach patients. Therefore, public policy that promotes competition and preserves patient safety must also respect proprietary information and include incentives such as data exclusivity and patent protections for innovative research and development.
Regulatory Oversight: The medical innovation community is constantly discovering new drugs and devices, and improving upon existing drugs and devices that provide patients with the means to live longer and healthier lives. Review and approval of these new lifesaving, life-enhancing technologies must consider both the potential benefits and risks to patients. No regulation can or should seek or purport to eliminate every possible risk. Sound principles of science and benefit-risk analysis should be applied to circumstances where regulation is warranted. During the research, development and review processes, the benefits and risks of medicines and medical devices must be considered and weighed against the benefits and risks of not treating or not preventing the condition. The NAM believes the FDA should embrace a more predictable and transparent process in determining how efficacy and safety parameters are balanced as part of the FDA's benefit-risk analysis. Such an approach would result in more timely, balanced and higher-quality decisions by the agency to the benefit of patients.
The NAM opposes government mandates that dictate the design of health care plans and reduce employer flexibility of plan design. Individual companies are best suited to assess the appropriate mix of benefits and direct compensation that satisfies employee needs while fulfilling corporate goals for continued employment and profitability. Instead of mandates, federal, state and local governments should work in partnership with employers to address health care coverage needs for Americans.
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The current structure of the U.S. tax code treats employer contributions to employee health insurance as nontaxable benefits that are not considered part of total compensation for income or payroll tax purposes. The NAM fully supports this tax exemption, which has helped make employer-provided health coverage the cornerstone of medical care in this country and provides millions of Americans with health insurance coverage.
To encourage employers to continue providing coverage, the NAM supports public policies that preserve full tax deductibility for employee health coverage.
The NAM promotes tax policies that encourage employers to provide health care benefits and minimizes the burden for doing so.
The NAM supports tax policies that promote use of, and enhance the flexibility of, HSAs and other consumer-driven health care benefits designs.
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Cost-shifting to employers represents a significant obstacle to reducing health care costs and increasing access to affordable health coverage. Uncompensated care delivered by hospitals and physicians and uncollectible hospital debt are passed on to patients and employers who provide coverage. Furthermore, inadequate Medicare and Medicaid reimbursements increase costs to the private sector and private companies. Reform of the Medicare and Medicaid system could better manage these shifts.
Access to health care is a concern and responsibility for both the public and private sectors. Cost shifting from one sector to another undermines the public/private partnership needed to achieve the goal of making coverage available to all Americans.
Eliminating cost shifting should be a critical policy objective. The NAM recommends that health care policies should be reviewed in light of several factors, including: costs in terms of taxes or other economic burdens that may fall disproportionately on one sector, and the impact on efficiency, innovation, quality of care and patient health outcomes.
Public programs such as Medicare and Medicaid should be reformed to distribute the cost burden equally between the public and private sectors and among consumers, payers and health care providers.
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2.07. Retiree Health Care
Demographic and cultural trends—such as the aging of the Baby Boomer generation and the desire of many employees to retire early – are changing the face of America’s manufacturing workforce. These trends have a significant impact on rising health care costs and access to affordable health insurance. Moreover, older U.S.-based manufacturing companies have large retiree populations, which add significant costs to employer-sponsored health care. Health care legislation and regulatory actions must reflect these dynamics.
Early retirees can boost the ranks of the uninsured as they lose access to their employer-sponsored coverage and cannot yet qualify for Medicare. Many employers are taking steps to address these issues, through phased retirement plans that encourage older employees to remain active employees.
While the NAM will remain at the forefront of private sector efforts to adapt to these changes, we support public policies that provide employers the incentives and necessary flexibility to manage the needs of their aging employees and soon-to-be-retired employees.
We support policies that encourage flexibility for employers with regard to the tax treatment of early retirees, benefits offerings and managing the shortage of skilled employees.
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2.08. Small Business Support
Unlike their larger counterparts, many small manufacturers do not enjoy the benefits of greater bargaining power with their health insurance carriers. The NAM advocates greater bargaining power for small businesses to make health insurance more affordable through reduced premiums. Health premiums could be significantly reduced through small-business health plans. These plans will also reduce the administrative cost burden for small employers.
The NAM supports innovative programs that will reduce the administrative and cost burdens for small manufacturers who wish to provide health care benefits for employees.
Back to top Adopted Winter 2012 Effective until Winter 2016