California last week became the first state to pass legislation creating a health insurance exchange as mandated under the new federal health reform law. Some states, like New York, have only begun to pay lip service toward implementing health reform, while others, like Missouri, are still fighting the federal law's legality.

But the legislation is nonetheless expected to serve as a model if it is signed into law as expected.

Employers generally do not like the COBRA program that allows laid-off workers to stay on their company's health plan. The problem is that the program is so expensive that only the sickest workers whose health care costs are higher than what they pay in premiums enroll.

The subsidy in the federal stimulus plan, which paid for 65 percent of the cost of a person's premium, was expected to change that by making it affordable for healthy workers. The subsidy can be used by workers who were laid-off before the end of May for up to 15 months.

Large businesses that pay out of pocket for their health care benefits
do not have to comply with all the requirements of the new health
reform law but to be eligible for this exemption they must keep the
health plan they had as of March 23.

Many employers, however, are choosing to change their plans rather
than maintain their so-called grandfathered status. The reason, of
course, are rising health care costs.

Last year, Medicare was predicted to run out of money by 2017. Now, Medicare is predicted to have enough money to last another 12 years. What changed? The answer is health reform.

At least that's the answer given in the Medicare Trustee's report issued August 5. The trustees oversee both Social Security and Medicare. The report states that health reform will save $575 billion over the next decade. That's because health reform raises taxes on high-income earners and eventually raises taxes on high-cost health benefits. The report also notes that savings are expected to come by reducing the number of uninsured hospital patients.

The University of Michigan Health System recently asked itself this question: what happens when a hospital admits it caused a medical mistake, takes responsibility and offers compensation to patients who have been harmed? Do patients sue or do they settle?

For employers, this is not just a matter of legal theory or even a question of whether you think tort reform and capping damages on lawsuits is the best way to bring malpractice insurance down.

Earlier this week, I wrote about how more employers looking toward consumer-driven plans with health savings accounts to save money should make sure they are also helping employees get the health care they need.

Employers that want to offer these plans during their upcoming open-enrollment period should also consider the impact health reform will have.

Employers are heading into "open enrollment" season when companies decide what kinds of health plans to offer to offer employees. More companies are including health plans with higher deductibles.

Though these plans have been around for nearly a decade, many employers and employees alike have little understanding of them and their impact on costs, a new analysis from the Employee Benefits Research Institute shows.

Employers may not like the uncertainty that the new health reform law has injected into their health care benefits plans, but they are not giving up on providing health care, as I wrote earlier this week. After years of wrangling, a bill passed. The law is on the books and employers are adjusting to a new reality.

Still, the effort to knock down health reform continues. This would seem to add more uncertainty into the plans of employers, who love nothing more than a fixed cost.

If you're thinking of dropping health coverage for your employees, think again.

Sure, many employer groused when Democrats passed health reform. They feared new mandates, rules telling them what kind--and how much--health care they needed to provide to employees.

If you live or work in New York City you know how the subway can be both a blessing (when it runs on time) and a curse (when it doesn't) or for reasons that on Wednesday became clear: fare hikes.

If you don't live in New York you can appreciate why the agency responsible for public transit, the Metropolitan Transportation Authority, is having such a difficult time making ends meet. At the top of the list is compensation and benefits costs, which account for two-thirds of the MTA's $12 billion operating budget for 2011.

The MTA says its health care costs are going up about 9 percent annually-which is actually in line with national increases. The challenge for a public agency of course is that it is locked into
contracts with its heavily unionized workforce. Making changes is not easy.

The plan the MTA put forward Wednesday was to enter in what it called "net zero" contracts with its unions-contracts in which any raise would be "paid" for by givebacks in productivity, changes in work rules or increased contributions to health care benefits. The unions took exception to this proposal but no one doubts that the compensation structure of government employees needs to come in-line with their private sector counterparts. Andrew Cuomo, the Democratic nominee for governor, has made reforming this imbalance part of his
platform.

Debt service aside (and the MTA's debt service totals $1.8 billion this year, growing to $2.5 billion by 2014), the MTA, like so many government entities throughout the country, has long term health care challenges ahead. Its health care retirement obligation totals $1.4 billion growing to $1.7 billion by 2014. While the MTA continues to pay enough into its retiree health care fund to pay for its current retirees' health care, the authority, citing this year's cash-flow problems, will not pay $57 million this year into a fund for future obligations.

The Great Recession has helped bring the issue of government post-retirement obligations to light. As government revenues shrink and obligations grow, taxpayers sense an inherent injustice between their own grim retirement prospects and the assurances given to public sector workers. Subway service cuts and fare hikes are only meaningful if they address the long-term problems rather than enable government to deal with short term crisis.

Cuomo is banking on this public displeasure, as is the MTA. Next year the MTA's contract with its largest union is up for renewal. The transit authority will be able to test whether it has public support for changing the way the state entity does business with unions. Bringing government into the 21^st century by reducing health care and other post-retirement obligations will be good for taxpayers and for businesses, including those with heavily unionized workforces.