I traveled a couple weeks ago to meet with colleagues, and the issue of health care reform came up at dinner. The first exchange or two were cordial enough. We happened to have a Brit sitting with us, so I asked what he thought of the U.K.’s health care system. He raved about it, and I asked about some of the stories presented primarily from opponents to government-run health care. He said that is not an accurate representation of the entire system, which he believed to be superior to the one in the U.S.One particular colleague got very heated under the collar about my questions. Her finger was wagging and pointing at me for a solid 15 to 20 minutes. For a moment or two, I nearly feared for my life. I let her go on for a bit, interjecting here and there, but pretty much let her assert that the government has to take care of everyone.My point at the time was that there are multiple ways to clean up our health care system, which is in need of repair, but the government needs to fix the controls it has over health care first, primarily Medicaid and Medicare. These debates are instrumental to our democratic design, and Americans are vehement in their held beliefs on both sides of the controversial conversation.So what does health care reform have to do with credit unions? Ultimately, a lot.While very few are even sure, or claim to be, about what’s contained in the litany of legislation on the subject matter, there are some overarching issues that credit unions should be studying.From a human resources perspective, public health care could save credit unions on one of the biggest line items employers encounter. Then again, if employers are fined for not offering health insurance, would the savings be worth taking the hit from the feds? Would a credit union that drops health insurance be as attractive to job seekers? If there’s a public option, would employers have the same employee base to use as a bargaining tool with insurance providers?The issue is obviously very complex and no one knows how it will shake out, whether there will be entirely government-run health care or cooperatives or significant tweaking to the current model. It certainly isn’t something to shove through for political reasons without fully vetting every aspect. (But, it is something that is going to serve as a speed bump for any hopes of credit union legislation.)Just look at the many aspects for credit unions alone. The government is already trillions in debt; funds will have to be raised to help pay for a government-run plan. Every time Treasury sniffs around looking for more money, a report is always generated on possibilities for more funding. Taxation of credit unions makes that list without fail, and the bankers’ trade groups pounce on it. You can’t rely on the argument that banks have lost their political capital because the bulk of the banks are in the same boat as credit unions; they aren’t all Citigroups or WaMus. Uncle Sam’s pockets have never been home to so many cobwebs, so credit unions’ tax-exempt status could possibly be in its gravest danger ever.An argument was posed to me that medical expenses are a major cause of bankruptcies in the U.S. so public health care could help stave off these filers. It doesn’t hold water though in comparison to the potential for a tax hit or fine credit unions could face if they don’t offer a qualifying plan.Bankruptcies are on the rise, up 34.5% in the first quarter of 2009 from first-quarter 2008. I looked at the financials of a particularly large California credit union that is circling the drain. This credit union, which has experienced rising delinquencies, still only reported 3.94% delinquencies to total loans in the second quarter, so 96% of its loans are still paying on time.Obviously, I’m simplifying things but bear with me. The same credit union has a charge-off rate of 2.31%. While these aren’t figures credit unions are pleased with, nearly 98% of its loans have not been charged off.To get back to my original point, just 11.7% of those 2.31% of total loans were charge-offs due to bankruptcy. Now, how does that compare with the possibility of a 33% tax on credit unions’ income? And that does not take into account all the nips the states that do not currently tax might take or the increases from those states that do tax.Cooperatives have been brought up in the debate in Washington, but not in the way we think of them. Alternately, credit unions could raise their profile if they present the credit union model as a possibility for the future of health care-an option that has never truly reached its hands in Uncle Sam’s pockets.–Comments? E-mail [email protected]

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