The NASE Position:
Currently, 46 million Americans are living without health coverage. In a 2008 survey, the National Association for the Self-Employed (NASE) found that more than a third of micro-business owners say they do not currently offer, nor plan to offer, a health insurance plan through their business for themselves or their employees. The survey also shows that small businesses with the least end up paying the most in terms of health insurance costs. Micro-businesses grossing less than $50,000 annually spend a median of 17.6% of their gross 2007 sales on health insurance, compared to a median of only 1% spent annually by companies generating more than $500,000 annually. Thus, the NASE supports efforts to improve our health care system to make it easier for individuals to attain and understand health coverage.
Expansion of Technology and Transparency in the Health Care Sector: Expansion and Funding for High Risk Pools:
Technology and transparency are two key components that can assist in lowering costs in our health care system. The NASE supports government investment in health information technology and legislation requiring transparency in the areas of cost and quality.
In order for individuals, families and business owners to make informed decisions regarding their health coverage, they need accurate information on both price and quality of service providers. The previous administration encouraged health care providers to voluntarily begin offering information on price and quality to consumers. Some insurers have moved forward with efforts to give their customers price information. In addition, the federal government is phasing in efforts to make companies that provide benefits/ health coverage in the Federal Employees Health Benefits Program to disclose prices. However, voluntary efforts to disclose pricing and quality information have not been widespread and more needs to done to ensure micro-businesses have the information they need to make smart choices for their business.
The NASE strongly supports the implementation of comprehensive health information technology to assist in giving patients and providers ready access to important medical data as well as to improve the quality of our health care while reducing administrative costs. In the 111th Congress, the American Reinvestment and Recovery Act (H.R. 1) recently passed by the House of Representatives included $20 billion to create federal health information technology standards and implement electronic medical record systems.
The NASE supports the expansion and increased funding of state high risk pools to assist in providing coverage for those with pre-existing conditions and chronic illnesses that often have difficulty obtaining health coverage. Established over 25 years ago, high-risk pools operate in 33 states and covered more than 181,000 people as of June 2004. According to the Council for Affordable Health Insurance, in August 2002 the federal government approved funding of up to $1 million each for states that did not have a qualified high-risk pool as an incentive to establish them.
In the 109th Congress, the State High-Risk Pool Funding Extension Act (H.R. 4519) was signed into law. Public Law 109-172 authorized $75 million annually to states with existing, qualified high-risk pools for fiscal years 2006 to 2010. Additionally, the law extends unused grant money for 2006 to be used to assist states in establishing new high risk pools. The legislation changes the formula which determines each state's high risk pool funding -- the new formula is based on three factors: (1) the percentage of uninsured individuals in the state, (2) the number of participants in each state's risk pool, and (3) requires that 40% of the funding be shared equally (benefiting small states).
Many experts are recommending the expansion of risk pools as part of comprehensive health care reform, and bills introduced in the 111th Congress contain such provisions. The Small Business Empowerment Act of 2009 (S. 93) would allow employees of small firms or the self-employed to join a national small employers and individual risk pool, while America’s Affordable Health Care Act of 2009 (H.R. 109) provide for the expansion of state high risk health insurance pools for fiscal years 2010 through 2014.
Individual vs. Employer-Based Approach to Health Reform:
The self-employed and micro-businesses purchase health insurance in two markets: the small group market and the individual market. The definition of a small group is determined by each state, though most define it as one with 50 or fewer employees. Firms in this size range looking to offer employer-based health coverage to their employees will look to the small group market for insurance options.
However, of those currently insured, the majority of self-employed and micro-businesses have purchased individual health coverage. According to the NASE 2008 Health Care Survey, of the more than 46 percent of responding micro-businesses offering health insurance, only 18.6 percent offer coverage for full-time employees. That is a significant decline from 2005, when 46.2 percent reported covering full-time employees. What we see from this data is a definitive shift of micro-businesses from the small group market into the individual market. The high cost to both the business and the employee in terms of cost sharing are the top reasons for this shift.
The NASE believes that in order for health reform to be beneficial to the micro-business sector of the small business population, proposals must tackle the individual market. Key issues in the individual market are cost and underwriting based on health status.
Many states have a suitable number of carriers in the individual insurance market to offer the self-employed and micro-business owners an array of options. However, cost increasingly becomes an issue for business owners and workers in small businesses purchasing insurance on their own. While there may be some competition in states to allow for a range of pricing options, state mandates in the individual market result in high premium costs.
The NASE believes that the state regulatory climate plays a critical role in keeping costs high. State mandates on coverage in all markets increase the cost of basic health coverage from a little less than 20 percent to more than 50 percent depending on the state. The Council for Affordable Health Insurance has identified that there are currently over 1,600 mandates in our health care system. While mandates can make health insurance more comprehensive, they also make it more expensive by requiring insurers to pay for certain health services that consumers previously funded out of their own pockets. It is likely that insurers will push that added mandate cost into premium rates.
The cost that excessive mandates add to health coverage can mean the difference between a micro-business going uninsured or purchasing coverage. Additionally, the regulatory and statutory conditions in states have created barriers that make it difficult for new carriers and new products to expand into markets. Without new carriers or competing insurance products, prices will remain high when one insurance carrier dominates a market.
Health reform proposals must take a good look at the role that states play in our health care system. A balance must be struck between adding costly mandates and ensuring that critical health services are covered by insurance.
Underwriting Based on Health Status:
At present, the individual market requires underwriting based on health status. If you are a business owner or worker with a medical issue, your health premiums will likely be significantly higher in the individual market or you may be turned down for coverage, leaving you with minimal options to obtain insurance.
Tackling the issue of underwriting based on health status is complex. Some reform proposals put forth in the 111th Congress have recommended that health insurance should be guaranteed issue, meaning that individuals cannot be denied access to coverage based on health status. This approach does have some negative consequences at it relates to affordability. Carriers are likely to charge higher premiums on guaranteed issue policies to allay potential costs related to undisclosed health issues. Though a self-employed business owner may now be able to access health coverage, it does not mean he will be able to afford it.
Improving and increasing funding for programs such as state high risk pools are a beneficial way of dealing with the population unable to gain access to health insurance in the current market due to health issues.
Mandating Health Coverage:
Another option present in recent health reform recommendations has been the establishment of mandates, either for individuals or employers. Policymakers considering the use of mandates in their reform proposals must be mindful of the detrimental effect they may have on these smallest businesses in this current economic state.
The NASE does not support the mandating of health coverage at this time. In particular, an employer mandate to purchase and provide health coverage that does not exempt micro-business, those with ten or less employees, would be destructive to this important sector of the economy. To reiterate, based on NASE’s 2008 health study, only 18.6 percent of micro-businesses nationwide were currently providing employer-based coverage to full-time employees. Consequently, an employer mandate would put millions of owners out of business and leave millions of workers unemployed. Health reform proposals put forth by President Barack Obama during the presidential campaign did include an employer mandate.
The NASE believes an individual mandate would also be harmful in this current economic climate. However, such a mandate requiring all citizens to have health coverage may be more workable in the future for the self-employed if paired with a meaningful subsidy such as a health tax credit to help with affordability. In addition, the self-employed and micro-business owners must be able to purchase the coverage of their choice. Any attempts to restrict plan options in order to obtain the subsidy would make the mandate unworkable.