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Report from Harrisburg: “If You Fix Healthcare for Small Business, You Fix It for America”

Originally Published in RMP Advisor, May 2009

by David Edman

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On May 4, 2009, 85 business owners gathered for this panel discussion on healthcare challenges to small business. The National Federation of Independent Business (NFIB) sponsored the forum during Pennsylvania Small Business Day at the Capitol in Harrisburg. Here are the key points.

How Does Our Healthcare System Threaten Business?
Small business has identified healthcare reform as its top priority because the current healthcare system and the way we pay for it is financially unsustainable. As a result, the health and financial security of Pennsylvanians and all Americans is under threat. Large employers can self-insure their health costs, but small-business owners and their employees are especially vulnerable to the weaknesses of our current system.

The evidence shows that small-business owners take care of their workers. On average, they pay about 18% more in insurance premiums than large firms do. More importantly, 51% of firms with 20 or fewer employees pay the full premium for their workers. (Only 37% of firms with more than 20 employees do the same.) So, “if we fix healthcare for small business, we fix it for America.”

For over 30 years, NFIB members have reported health insurance and healthcare costs as their number-one business concern. The good news is that policymakers finally appear to recognize the problem. But are lawmakers in Harrisburg working on reforms that will meet the needs of small business owners and working families? Are they on the right track?

What Direction Will Reform Take?
The panelists agreed that a broad consensus is emerging among many otherwise competing interests and that the system needs reform now. Although either the federal government or the states may shape the changes, reform at the federal level is more likely.

In Pennsylvania, the governor’s attempt at comprehensive reform has been taken off the table, but several bills are pending that will impact specific components of the healthcare system. Given that certain federal matching funds are going away, one particularly onerous bill seeks to replace these funds with a 2% tax on health insurance premiums. This would make health insurance less affordable for small business and would penalize employers for doing the right thing-offering their workers health insurance.

Other pending bills generally viewed as positive for the business community include a mini-COBRA law, elimination of payments to providers for adverse events, and renewal of the Pennsylvania Health Care Cost Containment Council (PHC4).

How to Limit Expenses
The panelists made several points about wasted healthcare expenses from unnecessary, inappropriate, and poor-quality care:

  • Defensive medicine drives a significant amount of unnecessary care-the need for tort reform is urgent.
  • Government should provide for meaningful competition between health insurance carriers.
  • Efforts must be made to change behaviors of providers and consumers.
  • Variations in treatment patterns are significant- compensation should be changed so that healthcare providers are rewarded for positive outcomes.
  • Establish “pay for performance” compensation systems.
  • Individuals should bear the consequences of their actions and lifestyle decisions.
  • Public policy must do a better job of teaching and promoting wellness.
  • Certain factors make containment of healthcare costs difficult, such as aging of the population and costs for new technology.

Solutions Outside the Box
A concept that’s been in the formative stages for a long time has triggered many questions. Members of the audience asked the panel about options for small businesses to form groups in order to pool their risk. Should there be a high-risk pool for individuals with pre-existing conditions? Should Chambers and Associations be permitted to form a single health insurance pool? There are no easy answers.

Another concern was whether the system can improve through changes in the approach to insurance rating, from community- to demographic- to experience-rating? Many people see the solution as a community-rating approach combined with mandated coverage. The problem here is that the young and healthy would be forced to pay more in order to subsidize the old and infirm. Is that fair?

For now, questions outnumber the answers and policy makers who seek to reform the system face big challenges.

*Panelists:

Moderator: David Edman, Risk Management Partners LLC

* This article is a general summary of the statements and comments made at the seminar on May 4, 2009 and do not represent the specific positions of any particular speaker.