FACT CHECK: Small Businesses and Health Care Costs
Posted by The Campaign on November 03, 2009 at 2:56 PM
There has been a lot of focus recently on small businesses and health care costs. Below please find some facts about health care costs and reform proposals put forward by health plans that could help small businesses provide affordable coverage to their employees.
According to the U.S. Government, Premium Increases Mirror Increases in Medical Costs
According to government data, health insurance premiums track directly with the underlying cost of medical care. As the cost of providing medical care increases, premiums rise accordingly. Some employers and families have chosen plans with lower premiums and higher cost-sharing (deductibles, co-pays, and coinsurance) to offset the increase in premiums.
Source: PricewaterhouseCoopers, A Shared Responsibility: Advancing Toward a More Accessible, Safe, and Affordable Health Care System for America, p.7
States Heavily Regulate Premiums
Every state imposes restrictions on the premiums that may be charged for health insurance coverage.
Every state requires certification that premium increases are consistent with actuarial standards with respect to cost trends and benefits provided.
Health Plans Have Put Forward Proposals to Help Make Coverage More Affordable and Accessible for Small Businesses and Their Employees
- Essential Benefits Plan: We propose the creation of new health plan options for small employers and their employees, as well as individuals. These "essential benefits plans" would be available nationwide and would include coverage for primary care, preventive care, chronic care, acute episodic care, and emergency room and hospital services. Alternatively, "essential benefits plans" should include coverage that meets an actuarial equivalence standard, along with the opportunity to include enhancements such as wellness programs, preventive care, and disease management. To maintain affordability, the essential benefits plan should not be subject to state benefit mandates that do not apply to the generally larger employers that enter into self-funded health care coverage arrangements.
- Tax Credits or Other Incentives to Assist Small Business: We support the establishment of tax code incentives or other types of assistance that encourage both small business owners to offer coverage to their employees and employees to take up coverage. We recognize the special challenges, both administrative and financial, that small businesses face in offering contributions toward their employees' coverage. Providing assistance can encourage these contributions and help enable employees to take up coverage which improves predictability and stability in the small group market.
- Improving Coordination of Private and Public Programs Strengthens Small Group Coverage: Premium or other assistance offered to low-income individuals and working families can be applied to and work with employer-sponsored coverage. This is important whether the assistance is provided through Medicaid, the Children's Health Insurance Program (CHIP), or other expanded programs designed to help individuals and families obtain coverage. Improved coordination allows workers to take up coverage offered by small businesses by leveraging both public and private sources of assistance, and benefits the firms' employees as a whole by increasing rates of participation in the small group plan.
- Micro-firms: "Micro-firms" (those with fewer than 10 employees) face special challenges in offering coverage. Statistics show that only about one-third of these firms offer coverage. This reflects the administrative, financial, and logistical challenges many micro-firms face in setting up and establishing plans and offering and contributing to their employees' coverage. To help these firms meet these challenges, enhanced tools could be developed that would allow those micro-firms that have found it impractical to offer coverage, to contribute to coverage purchased on a pre-tax basis by individual employees. As part of comprehensive health care reform, employees could then use these contributions to help purchase coverage in a reshaped health care system that combines an individual requirement to obtain coverage with reforms in the individual market.
- One-stop information source: All small firms will benefit from collaborative efforts between health plans and the public sector (e.g., insurance commissioners) to ensure that small employers and individuals have one-stop access to clear, organized information that allows them to compare coverage options. This "one-stop shop" also could allow individuals to confirm eligibility for tax credits or other assistance and even provide a mechanism to aggregate premium contributions from multiple sources. By providing a mechanism to combine even modest contributions from multiple sources (public and private), this new one-stop shop could be especially helpful to employees who may hold multiple jobs.
