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By Bertha Coombs Reporter
CNBC
updated 7/26/2007 6:46:11 PM ET 2007-07-26T22:46:11

Rising costs are a challenge for Specialized Packaging Group, a Hamden, Conn.-based paperboard package producer. But nothing has tested CEO Carl Highsmith's resolve more than keeping his 500 workers insured.

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“For me personally, providing health care coverage to our employees is something that is a right and moral thing to do,” Highsmith said.

But when his company's health care costs doubled in five years, he decided to self-insure: Instead of getting coverage from any health care provider, he puts aside a fund for the rainy day, a risky move that could possibly put him out of business if something major happens.

Highsmith also has become an advocate for universal health care, a political catchphrase used to be unlikely for corporate America, who’s not in favor of a more aggressive government.

“I think we're really at the stage where the issue has to be addressed,” Highsmith said. “I think it's vital to our competitiveness.”

Health care costs are eating into company profits like never before. Insurance premiums for American companies are rising at a rate much faster then inflation. A 2006 Kaiser Family Foundation report found premiums for company insurance plans have increased by 87 percent since 2000.

In some sectors, health care is taking a stunning toll. Ford Motor officials say health coverage adds $1,200 to a vehicle’s cost, about $600 more than that of its Japanese competitors.

The pressure to compete is putting major companies in the front line of the political debate, in line with some of the most unlikely partners.

In February, Wal-Mart, the nation’s biggest employer, partnered with the Service Employees International Union, the trade union which spent years accusing the retailer of labor rights violations, to launch Better Health Care Together, a coalition seeking universal health care by 2012. Other companies that hopped on board include Intel, AT&T, Qwest Communications and General Mills.

“There's nobody I talk to that says this is a subject we shouldn't be working on,” said Steve Sanger, General Mills’ CEO. “We need to be part of the discussion.”

Wal-Mart’s competitor, Safeway, has initiated another campaign for universal coverage, Coalition to Advance Health Care Reform. Its CEO Steve Burd advised Sen. Ron Wyden, D-Ore., in drafting a high-profile universal health care proposal Wyden introduced to Congress last year, according to Jonathan Cohn, author of “Sick: The Untold Story of America’s Health Care Crisis – and the People Who Pay the Price.”

Political observers say the involvement of corporate America is adding a fresh tone to the emotional debate. Instead of advocating health care as a birthright, the competitiveness argument appears more likely to reach a bipartisan deal.

Few in the corporate world are advocating for a total shift of insurance from the private sector to the government. The Wyden plan proposed a system for employers to cash out health benefits and add them to employees’ wages. Then the government would mandate an individual insurance plan for everybody to buy directly from private insurers.

The idea is to reduce premiums by enlarging the insurance pool and to level the playing field for employers.

The Wal-Mart-led coalition still does not have a clear plan for universal health care — a deliberate omission meant to encourage more partners to join.

“How to do it is complex, and there could be unintended consequences. But I think we've got to find a way to do that,” General Mills’ Sanger said.

Otherwise, Specialized Packaging Group's Carl Highsmith says, spiraling costs are going to kill businesses like his.

“I either become non-competitive or unprofitable. In either case, I go away as a business,” he said.

The Associated Press contributed to this report.

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