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No business will be required to pay more than 7.6% of its total payroll for health insurance. For big companies, such as automakers, which now pay about 19%, the potential savings would provide an incentive to hire new workers. But for small firms that now provide no health insurance, the requirement will add to the cost of labor. Some of these firms will cover the cost by cutting profits, raising prices, withholding raises or extending overtime hours. But many firms will not have these options. Most vulnerable are enterprises like restaurants and farms, which employ many of the nation's 4.8 million minimum- wage workers and often operate with slim profit margins. For them, cutting jobs may be the only option. The National Federation of Independent Business has estimated that 1.6 million jobs will be lost over five years. A new study, financed by restaurant owners, forecasts losses of 3.1 million.
The White House rejects these figures as flawed because they don't sufficiently account for jobs created in firms that save money through lower insurance costs and because they are based on false assumptions about the tightly guarded reform plan. The next computer runs, to be conducted on the Urban Institute's microsimulator (called TRIM, for Transfer Income Simulator), will include various "transition subsidies" designed to minimize job losses for small businesses and low-income employees. His advisers plan to present Clinton with four options this week for easing the transition, but one official said they were having trouble designing subsidies that were not "a nightmare to administer."
Hillary Clinton, who heads the health-care-reform effort, is committed to a rapid phase-in, by January 1996, for universal coverage and a generous basic- benefits package -- though few others believe this schedule is realistic. She has waved off warnings of job losses as the propaganda of greedy business interests. Her strong views and assiduous hunting of suspected leakers have exerted what one official describes as a "chilling effect" in sessions she attends. Nevertheless, at a recent meeting, her colleagues report that Laura Tyson, chair of the President's Council of Economic Advisers, cautioned that once the plan is released, respected outside economists will run it through standard econometric models, which will probably show job losses, "and some of those numbers might be big."
Clinton health-care planners have tried to address the concerns raised by small business, which enjoys great influence in Congress. They emphasize that under the proposal, the smallest businesses will pay as little as 3.5% of their payroll for insurance, rather than the 7.6% top rate, with taxpayers subsidizing the rest. And the smallest businesses will be allowed a slower phase-in of the new expense. Insists Magaziner: "We think we can do this without having a negative employment effect." Magaziner, backed by Hillary Clinton, has so far insulated the President from internal assessments that might challenge his rosy scenario. But that, officials say, will change in the meeting scheduled this week.