At Large : Health insurance - what's a small business to do amidst all the confusion and uncertainty?
By Doug Cabral
Published: August 20, 2009
To understand the dilemma facing small to medium-size Vineyard business owners - and similar businesses nationwide - as they contemplate the health care insurance future, consider these real-life circumstances.
A business familiar to many Islanders, but unidentified here at the owner's request, offers health insurance to its employees and has for years. The cost has increased annually, sometimes by seven percent, sometimes by 11 or 12 percent. The business owner does not know until shortly before her annual renewal date what the change will be.
The owner also does not know - that is, she is not permitted to know - how her employees use the benefit. Do they visit a doctor often, so that a lower office visit co-pay would benefit employees? Do they use very little prescription medication, so that a larger co-pay might save some premium dollars? Are some of these employees in the grip of chronic medical conditions that require extensive, specialized care and even hospitalization, in which case lower out-of-pocket maximums may be beneficial? Do they use chiropractic benefits or mental health services or other non-traditional medicine, so that re-jiggering the benefit structure to allow greater use of these, but increasing deductibles for some traditional medical services might lower costs? In other words, is there a way to adjust the benefits to suit the use and consequently to trim the cost?
'Uncertainty multiplies'
"But, I don't know what to do to cut the costs. I don't know what the premium increase will be, and I don't know how to shave the increase without harming the interests of my employees," she said. "Plus, now with something coming out of Washington, the uncertainty just multiplies. And these are tough times for Vineyard businesses."
Nearly nine out of 10 Americans enjoy health insurance coverage under plans whose premiums are paid largely by employers. Costs and benefits are generally the same for all.
The business serving as an example here offers insurance from a well known carrier to 18 employees. The total premium cost is about $242,000 per year, or an average of $13,400 per employee per year. This business pays about 66 percent of the total. The employees pay the balance.
Apart from the high cost, the unpredictability, the lack of control over health insurance costs for her employees, and the uncertainty over the outcome of the Obama administration's effort to reform health insurance and health care all frustrate this business owner. And the uncertainty is increasing.
Reaching goals
Among the goals for reform that the president identified at the outset of his campaign were: cover everyone, even those with pre-existing conditions, and do so without adding to the nation's annual budget deficit; ensure portability so that if someone loses or changes jobs, the health insurance benefit will not be lost; and reduce health care costs and consequent insurance premiums so that the growth of national health care expenses diminished.
Among the most prominent health care proposals that have emerged from Congress, confusion and uncertainty reigns for business owners whose experiences resemble those of the example sketched above. The plans extend coverage to those who are now uninsured or under insured, but they do not address portability or inspire confidence that the growing costs will be restrained.
A Senate plan will require employers with 25 or more workers to contribute at least 60 percent of the premium costs for their full-time employees. If the employer does not meet this requirement, the penalty will be $750 for each eligible full-time worker and $375 for each part-time worker.
A House bill requires employers with annual payrolls greater than $250,000 to contribute 72.5 percent of premium costs for full-time employees and 65 percent for families they cover. The penalty on the employer for failing to provide the coverage would be a payroll tax of up to eight percent of wages for an employer with an annual payroll of more than $400,000.
On the other hand, the Senate legislation would give tax credits to employers with fewer than 50 full-time workers, but the employer has to pay at least 60 percent of the employee insurance premium. The credits depend on size of the employer, the extent of the coverage, and they are available for three years.
And the House proposes credits to employers with fewer than 25 full-time workers. The credit might run to 50 percent of the premium costs, again depending on the size of the employer's business, the pay, and employees who earn more than $60,000 won't qualify.
Neither of these plans is likely to become law, as it now exists. Both have some of the features that the president has deemed crucial, but netting out the gains and losses for the employer/example I've cited is beyond even algorithmic possibility.
And, here in Massachusetts
Then, there is the state government's new health care program, which requires every Massachusetts resident to have health insurance. The mandate has succeeded to the extent that more than 90 percent of residents now have some form of coverage. The new state law demands that employers cover their employees or pay a penalty. And, it's not a big one.
There are other features of the Massachusetts experiment in universal coverage - a law passed during the Romney administration and touted by the former governor as a model for federal law - that resemble parts of the House and Senate bills, but no Massachusetts employers can know today which of these features will survive the Congressional process or how the federal law, if one is passed and signed by the president, will relate to the state law.
Employers have not, as was feared, dropped employee coverage, paid the penalty, and shifted the insurance burden to the state.
But, at the same time, in common with the Congressional proposals, cost controls - intended to "bend the cost curve" - in the Massachusetts law are few and have been ineffective. The costs have sharply outrun projections.
"What Massachusetts has not yet figured out," the New York Times observed in an editorial recently, "is how to slow the relentless rise in medical costs and private insurance premiums ... The state's political leaders decided to expand coverage first, while postponing the hard decisions about cutting costs until lots of people, businesses and institutions had a stake in the success of the enterprise. Now the state seems poised to tackle costs - with an approach that is far more ambitious than anything currently being contemplated on Capitol Hill. A special commission has just recommended that the state try, within five years, to move its entire health care system away from reliance on fee-for-service medicine, in which doctors are paid more for each additional test or procedure they provide. "
And, the New York Times is editorial devoted to the success of the current reform effort
Fee for service health care delivery is what Medicare is today. It's totally portable and enormously expensive. Experts widely agree that a managed care delivery system is the best hope for limiting growth of health care costs and the related insurance premiums. The Massachusetts legislature may move to a capitation system, in which providers are given a fixed amount of money for each patient served, thus inspiring tighter management of health care services and more efficiency, and leading perhaps to the R word.
That's because proponents hear managed care and think health care "rationing." Politicians, who hear from those who fear change from their Medicare fee for service coverage and in turn fear voter anger, offer assurances that there will be no Medicare cuts in benefits or funding. Proponents of federal legislation promise health care savings, or at least a reduction of the rate at which health care costs grow, even while proposing to cover 40 or 50 million more Americans. Critics say, come on, we've heard that before. Who can help but doubt it.
What's a business owner to think, or to do? What side of the debate should she join?
