The Chairman of the HELP subcommittee on Primary Health and Retirement Security, Mike Enzi, R-WY, along with witnesses, asserted that cost is the number one reason why small businesses do not offer health care to their employees, in a roundtable discussion this afternoon.
Tom Glause, who is the Insurance Commissioner for the State of Wyoming, echoed the importance of cost, and added in his testimony that the second consideration small business employers have is choice.
“Can the small employer provide the coverage that the employees need,” Mr. Glause wrote, “with networks that are sufficient, and out-of-pocket costs that are reasonable?”
Among the concerns that Mr. Glause listed in Wyoming health care, the rate of uncompensated care was held up as particularly worrying. It has seen a 3% annual increase, and he warns that a report by the Wyoming Hospital Association augurs “larger increases because of increasing unemployment, increasing numbers of individuals with high deductible plans, and increasing numbers of uninsured.”
Individuals with higher deductibles are more likely to seek uncompensated care, Mr. Glause explained, and costs from uncompensated care ultimately raise the price of deductibles.
“High deductibles due to uncompensated care…[threatens the] existence of facilities,” he said.
Warren Hudak, the President Hudak and company, of a small Pennsylvania accountancy firm, testified on behalf of the National Federation of Independent Business. He called his firm a “typical small business,” and said that health care costs are consuming revenue.
“I feel like we’ve been placed in an impossible position,” he told the subcommittee.
Thomas Harte emphasized throughout the day affordability of care. He was representing the National Association of Health Underwriters, and is also the president of an employee benefits company, Landmark Benefits, Inc. in New Hampshire. He talked about both his experience in running a company with 17 employees, and in providing benefits plans to small businesses.
Mr. Harte painted a grim picture of massive rates jumps by numbers like 23.32% and even a whopping 46.60% He warned that with outrageous deductibles shooting up to $5,000 individuals are increasingly forgoing necessary medical procedures.
Sarah Lueck, of the Center on Budget and Policy Priorities, gave more of a defense of the health care environment, and of what she sees as the worthy reforms of the Affordable Care Act. Despite what the other witnesses described as mounting pressures on employers, Ms. Lueck pointed out that contrary to predictions before the passage of the health reform the ACA has not caused employers to drop benefits.
Mr. Glause clarified that it is health care that determines the cost of health insurance, and highlighted skyrocketing prescription prices as deserving a great deal of the blame in rising deductibles and premiums.
Mr. Harte agreed with Mr. Glause, using the 49% rise in deductible price between 2009 and 2014 as an example. Mrs. Lueck testified to the fact that the ACA mandated that 80% of premiums be used for health care, with the additional 20% going to overhead and profits. Mr. Harte told the subcommittee that 30% of that 80% goes to prescription costs. He also said that while the ACA has insured many more people, it has had the consequence of raising costs for many others.
Mr. Hudak related an anecdote about a back surgery he had performed before the reforms. The procedure was designated as elective by his plan, but he said that because the condition was causing him so much pain he negotiated a better price with his doctor and was able to get the treatment. He said that the surgery had made him much more productive afterwards, and reiterated a call for greater flexibility in what employers can offer.
Tim Scott, R-SC, blamed an “[unparalleled] regulatory environment that exists today” for mounting levels of poverty. He claimed that the two primary reasons for this are the ACA and Dodd-Frank legislation. He wondered if the ACA may actually be increasing the cost of health care.
Reflecting on the $5,000 deductibles cited by Mr. Harte, Mr. Scott observed that “it is difficult for the average American to put $400 together.”
Mr. Scott also said that he “think[s] the employer mandate and penalties will actually create a perverse incentive to provide less coverage [to] employees.”
“The small business community has always struggled with health care premiums,” Mr. Hudak answered. He echoed concern with high prescription prices, saying his wife’s prescription had rose from $100 to $600. Mr. Hudak championed health reimbursement arrangements(HRAs), which allow employees to purchase their own health plans. “I have long been a supporter of consumer-driven health insurance arrangements,” he wrote in his testimony, “and believe they are key to curbing unsustainable health care cost increases.”
Mr. Hudak later said that “the only way we can compete with the big guys with a lot of money is with flexibility,” and he believes that HRAs are just such a flexible plan. Mr. Hudak cannot offer them anymore because they were banned from being offered by employers in 2014.
“Purchasing health insurance is overwhelmingly complicated,” said Mr. Harte, “…it’s likely the most complicated product you’ll ever purchase.”
Mr. Harte wrote of his desire to see passage of S. 1661, which removes agent and broker fees from the medical loss ratio. His firm provides those services, and he argued that they are essential for anyone purchasing a health insurance plan.
An exchange between Senator Bill Cassidy and Ms. Lueck led to a consensus between her and the Louisiana Republican that a look at what percentage of income people pay for health care is deserved. While Ms. Lueck commended the ACA for substantially lowering deductibles for lower income people, Mr. Cassidy challenged the law’s success in ensuring middle class people get health care.
A single woman making $75,000 a year would pay 15% of her income towards health care, Mr. Cassidy said, claiming that rates this high lead to forgoing care. The ACA was supposed to eliminate medical bankruptcy, he continued, but they have not declined while out of pocket exposures increase and premiums rise.
Ms. Lueck called employees taking more of the burden a longstanding trend that predates the 2010 law.
Transparency trends were touted as successes in lowering costs. Ms. Lueck noted the Summary of Benefits and Coverage form(SBC), which compares plans’ benefits and cost-sharing, as a success. She also praised the standards the ACA set, writing that they “help consumers compare coverage options, promoting competition based on price and quality among insurers—which can help reduce premiums.”
Mr. Harte told Mr. Enzi of transparency’s importance in keeping down health care costs, noting that facilities differentials can reach as high as 600%.
There was a coalescence around a rejection of the employer mandate in providing health care by some of the witnesses. Mr. Harte called the time that administration takes “overwhelming,” and expressed a desire for the employer exclusion to stay in place. This exclusion excludes employer contribution to employee health care from the employer’s taxable income. He said that increasingly, higher fees and arcane regulation are causing employers to “just say, ‘why not just pay the $2,000 penalty?‘”
–by Marlon J. Ettinger