Health Insurance
Issue Overview: Skyrocketing health insurance premiums continue to top the list of problems facing small- business owners. Many small-business owners have suffered through premium increases—as high as 50 percent—over the last several years. As a result, many businesses are forced either to shift the cost of health-care to the employee or drop health-care coverage altogether. More than one-half of all uninsured adults either work for or own small businesses. In Pennsylvania, employers pay more than $10 billion in premiums every year.
NFIB Position: NFIB supports cost effective means to ensure the small-business community is able to purchase quality health care in the private marketplace. NFIB members support consumer-driven, market-based efforts to lower the cost and increase the accessibility of health insurance.
NFIB supports:
- Health Savings Accounts: NFIB urges the legislature to make contributions into a Health Savings Account free from Pennsylvania state income taxes. HSA contributions are free from federal taxes. State tax relief would make HSAs even more affordable. Pennsylvania must clarify state insurance law by Jan. 2006 to permanently allow Health Savings Accounts in Pennsylvania.
- Small-Business Health Plans: NFIB urges the legislature to adopt a resolution urging Congress to enact small business health plans to allow small-business owners to band together across state lines through their memberships in bona-fide associations to purchase health insurance for their families—giving small-business owners the same access to affordable health care that unions and Fortune 500 companies already enjoy.
- Moratorium on New Health Mandates: NFIB strongly supports a moratorium on the enactment of additional health benefit mandates until the legislative Budget and Finance Committee conducts a review of existing mandates enacted since 1990. Studies have shown that mandated benefits raise the cost of health-care insurance. As costs rise, small businesses, in particular, struggle to afford health-care coverage for their employees. As a result, many small businesses are forced to drop coverage. In essence, enacting benefit mandates has the opposite effect than the intended purpose of covering more individuals.
- Basic Health Plans for Uninsured: NFIB strongly supports a basic health insurance policy for employers with 50 or fewer employees. Such policies would be exempt from most state mandates. This low cost option would allow small-business owners who currently do not provide coverage an initial step into the marketplace. This policy would be low-cost, yet at the same time provide a sufficient level of basic health care
- Health-Care Tax Credits: NFIB supports tax credits for small businesses that provide health care. Tax credits help level the playing field with larger businesses that are afforded full deductibility of health-care costs. They also provide incentives for small-business owners to offer health care.
NFIB opposes:
- Mandates: NFIB strongly opposes legislation that mandates insurance policies to cover specified benefits. Health mandates are recognized as one of the cost drivers behind rising premiums. Such mandates simply make health insurance even more expensive and unaffordable to small businesses. Further, these mandated benefits have applied only to Pennsylvania's smallest employers, who unlike large employers are not exempt through ERSA (Employee Retirement Security Act).
- Mandatory Community Rating: Mandatory community rating hurts small business. Wherever implemented, mandatory community rating raises premiums, especially as young healthy employers and employees drop coverage. When premiums go up, so does the number of uninsured. Community rating gives dominant health insurance companies an unfair competitive advantage over insurance companies with smaller market share—often forcing smaller insurance companies to leave the marketplace. Small-business owners are left with fewer choices and higher premiums. This happens because dominant insurance companies are able to spread their risk over a larger pool of policyholders. Unable to compete, smaller insurance companies simply leave the market – leaving small businesses with fewer choices, and the dominant companies with less competition. Community rating doesn't address the causes of rising health insurance costs—it simply shifts the costs.
- Assessments on Cash Reserves: NFIB opposes legislation to tax the cash reserves of health insurance companies. This proposal will make health insurance even more expensive because health insurance companies likely will increase insurance premiums on small businesses and other policyholders to cover the cost of the government raid on their cash reserves.
Issue Status: NFIB again is working with our allies in the state legislature to lead the fight for consumer-focused, market-based efforts to lower the cost and increase the accessibility of health insurance.
Health Savings Accounts: The Pennsylvania State Senate unanimously passed SB 300 (sponsored by Sen. Gib Armstrong) This legislation will allow Pennsylvanians to set up tax-free HSAs to pay for medical expenses and enable more small-business owners to obtain affordable health coverage for themselves and their workers. The legislation now goes to the state House.
Health Mandates: NFIB strongly supports HB 738 by Rep. Boyd for a moratorium on the enactment of additional health benefit mandates until the legislative Budget and Finance Committee conducts a review of existing mandates enacted since 1990. Studies have shown that mandated benefits raise the cost of health insurance. As costs rise, small businesses, in particular, struggle to afford health coverage for their employees. As a result, many small businesses are forced to drop coverage. In essence, enacting benefit mandates has the opposite effect than the intended purpose of covering more individuals. Mandate bills introduced, include: HB 293 (prescription drugs), HB 296 (impotence), HB 341 (hair plugs), HB 350 (hearing aids), HB 360 (nutrition therapy), HB 499 (mental health) and many others. NFIB opposes these bills.
Rating Restrictions: Currently the state's largest health insurance companies, Highmark and Independence Blue Cross are pushing legislation, SB 671, and HB 1240, that impose rating restrictions designed to stifle competition and will lead to higher insurance premiums for small business and increase the number of uninsured. In states where legislation similar to HB 1240 and SB 671 was passed, like Kentucky, Maine, Massachusetts, New Hampshire, New Jersey, New York, Vermont and Washington, premiums shot up anywhere from 150-400 percent according to research by the Heartland institute.
Rating restrictions like mandatory community rating hurt—not help—small business. Wherever implemented, mandatory community rating raises premiums, especially as young healthy employers and employees drop coverage.
When premiums go up, so does the number of uninsured. Community rating gives dominant health insurance companies an unfair competitive advantage over insurance companies with smaller market share—often forcing insurance companies with smaller market share to leave the marketplace.
When premiums go up, so does the number of uninsured. Community rating gives dominant health insurance companies an unfair competitive advantage over insurance companies with smaller market share—often forcing insurance companies with smaller market share to leave the marketplace.
Community rating doesn't address the causes of rising health insurance costs—it simply shifts the costs. In their 2004 study, How Eight States Destroyed Their Individual Insurance Markets, the Heartland Institute found significant premium increases in states that adopted modified or community rating.
According to Heartland research, premiums for a traditional family plan in New Jersey shot up 200 percent to $3,517 per month early in 2003. Rates in Kentucky rose from 37 percent to 165 percent within a few short years of enactment of its law. Today, rates in rural Vermont are four times as high as they are in rural Illinois. The percentage of increase in some New York counties were as high as 175 percent.
Pay or Play Health Care: With limited, expensive health-care options, many small-business owners cannot afford to provide their employees with the health insurance they would like, forcing many small-business employees to seek care at such facilities. Recently, state Rep. Mike Veon announced plans to introduce Medicaid-reporting legislation. This type of bill, which has different thresholds—some as low as 25 employees—would require health services to get the name of the employers of people who state-run health insurance. Also known as "Scarlet-Letter policy-making," this type of legislation seeks to bully employers who cannot afford to purchase health insurance for their workers. Unfortunately, this proposal does nothing to reduce health insurance costs.
Ultimately, the Medicaid reporting legislation leads directly to a pay-or-play health insurance system. Under this "Pay or Play" system, if an employer does not pay for a specific level of health-care benefits, then they will be subject to a payroll tax, which will then be used to fund the state health-care delivery system
One employer that has become the target of this type of legislation in Maryland and several other states is Wal-Mart. In April, Maryland lawmakers passed the Fair Share Health Care Act requiring companies with more than 10,000 workers to spend at least 8 percent of their payroll on health benefits or put the money directly into the state's health program for the poor. The gimmick is that nothing stops lawmakers from lowering the threshold from 10,000 workers to two.
What to Do: Contact the governor and your House and Senate members.
What to Say: Urge them to support legislation giving small-business owners access to more affordable health insurance choices, including HSAs and Small-Business Health Plans. Urge lawmakers and the governor to stem health insurance premium increases by opposing new health mandates and mandatory community rating.
Join the fight for affordable health insurance! Your voice as a small-business person is among the most credible in the fight to make health insurance affordable. Please contact NFIB/Pennsylvania State Director Kevin Shivers. We'll add you to our list of small-business owners who are fighting for affordable health insurance and include you in important mailings related to our legislative and political work.
