White House May Broaden Small Firms’ Health Subsidy : Insurance: Clinton is seen making concessions. But business group still opposes plan as it heads to Congress.

WASHINGTON — In a clear concession to small businesses, Administration health care planners have decided to significantly broaden a government program to subsidize employer health costs, White House sources said Monday.

President Clinton’s health reform plan, scheduled to be sent to Congress Wednesday, would extend eligibility for premium subsidies to small firms with as many as 75 low-wage earners instead of 50, the cutoff level in a Sept. 7 draft of his plan.

Small business owners have said that the proposed government requirement that all businesses pay part of their employee health care premiums would impose unacceptably burdensome new costs. The change came after Clinton met here last month with a group of small business owners. During the meeting, Clinton pledged to consider broadening the eligibility criteria for government subsidies.

Small businesses have been among the most outspoken critics of the Administration’s health reform agenda. But despite the expanded subsidy program, a top official of the 500,000-member National Federation of Independent Business said Monday that the group remains unalterably opposed to the mandate.

Also on Monday, a coterie of Administration analysts raced to complete work on the draft legislation, estimated to run 1,600 pages, so that it can be delivered to Capitol Hill on Wednesday. Other Administration health officials began briefing senators on the plan. The House was not in session Monday but briefings for members were being scheduled for today, as were similar sessions for the news media.

“The plan has not really changed,” one source said. “The members will be hearing pretty much the same things as before.”

Among the outstanding issues, apparently, is the politically sensitive matter of what monetary limits will be placed on the subsidy program--not only for small businesses, whose subsidies are likely to be phased out after eight or 10 years, but also for indigent individuals who cannot afford to pay any of their insurance costs.

“The last thing we want to do is create a new, uncapped entitlement program,” said one senior Administration official.

Another official acknowledged that a program which promises universal coverage--and premium subsidies for everyone eligible--threatens to become a severe drain on the Treasury, particularly during hard economic times.

The main financing mechanism for Clinton’s plan is a government requirement that all employers pay at least 80% of every worker’s health insurance premiums, with the employee paying the rest.

Of the estimated 37 million uninsured Americans, about 85% are already employed. Thus the requirement that businesses and individuals pay for health coverage would go a long way toward achieving universal coverage. The unemployed and the indigent would have their premiums subsidized by the government.

It was unclear whether the legislation will include a specific limit on the size of the “national subsidy pool.” The President and First Lady Hillary Rodham Clinton, the primary architect of the Administration’s plan, have said recently that they are willing to negotiate on virtually every element of it, with the exception of providing universal coverage quickly.

It also was not clear what remedy the Administration would propose if a cap on the subsidy pool were reached. If that occurs, Congress may have to appropriate additional funds for the pool, suggested another senior Administration official.

Without such a ceiling on a subsidy pool, some members of Congress are likely to be wary about creating another open-ended entitlement program since some of the largest and most expensive programs in the federal budget now are entitlements--especially Medicare and Medicaid.

As many skeptics of Clinton’s proposals have noted, when Medicare was enacted nearly 30 years ago, its proponents said that the health care program for the elderly would reach the whopping price tag of $9 billion by 1990. In fact, Medicare cost $119 billion last year and is still rising at an annual rate of between 9% and 11%, Clinton said in his health care speech to Congress on Sept. 22.

The only new tax increase in the President’s proposals is likely to be a 75-cent-per-pack tax increase on cigarettes. Otherwise, funds for the reforms are to come from anticipated savings that the plan is supposed to produce. Those savings are projected to total more than $500 billion over a five-year period, including $238 billion from Medicare and Medicaid.

Those projections have aroused strong skepticism among some members of Congress and private analysts. But the President and others in his Administration have repeatedly expressed their confidence in the estimates.

On the proposed premium subsidies for small businesses, no firm will be required to pay more than 7.9% of payroll toward the health premiums of its work force. Low-wage firms with fewer than 75 employees will be eligible for caps varying from 3.5% to 7.9% of payroll, depending on their average wages. The lower cap would apply to small businesses whose wages average less than $12,000 a year.

The subsidies would go directly to regional health insurance purchasing alliances, made up of consumers, that would bargain with networks of medical providers for the best coverage plans.