THIS IS MY RESPONSE TO AN NFIB ARTICLE ABOUT HOW TO CURE THE PROBLEM OF “HEALTH CARE COSTS” FOR SMALL BUSINESSES 

IT WAS WRITTEN IN THE SPRING OF 2010 DURING THE DEBATE OVER “HEALTH CARE REFORM” IN THE CONGRESS AND BEFORE THE PASSAGE OF PPACA (THE PATIENT PROTECTION AND AFFORDABLE CARE ACT) ON MARCH 23, 2010

SEE NOTES AT THE END OF THE ARTICLE FOR AN UPDATE POST PPACA

   You know I’m really tired of the enormous amount of misinformation that continues to be regurgitated and the obvious axe-grinding that passes for discourse in this arena. Dr Bob wants to talk about ticket scalping reform and compare it to the need to provide access to medical care for all of our citizens. You know, there is a big difference between health CARE and health INSURANCE. Health is the maximization of outcomes: Insurance is the mitigation of risk. The two are diametrically opposed concepts. The cost of health CARE that Dr. Bob and his brethren provide is reflected in the cost of health INSURANCE that you and I pay. The more Doctors and Hospitals charge, the more your premiums are going to cost.

    Hey,  small business owners look around. The cost of health insurance isn’t breaking most small businesses because they don’t provide it in the first place. For those that do, the costs are not remarkably higher than are paid by big business. Look at the federal government website, www.opm.gov  yes that plan that Congress is covered by, and you will see that the premiums paid by the government for (?) how many million employees are not significantly lower than the premiums that are paid by my agency or for almost all of my clients. (2010 Aetna Open Access high family coverage is $1409.96 per month and is $559.72 for high self coverage according to the OPM website)  In fact, our agency is currently insured by Blue Cross—we have 6 employees on our plan—and our premiums are considerably lower for the HSA Compatible federally-qualified high deductible health plan that my wife and I have chosen. The rates for our employees are also lower than the federal employees Blue Cross high option plan in Texas. How much are they? Our $3000 deductible HSA compatible plan is $248 per month and the standard PPO co-pay plan that my employees have chosen is $364 per month. I am 62 and we have a female age 59, a female age 55, a female age 50, a female age 32, and a male age 40. Not a spring chicken in the bunch!

    Where the reality meets the road is this:  How much subsidy are the big employers providing to their employees for the cost of the insurance. Back to the federal employees’ website: That same plan above only costs the employee $90.72 every two weeks for single coverage or $274.71 every two weeks for family coverage. BUT this is NOT the cost of the insurance; it’s $599.72 a month or $1409.96 a month. The taxpayer (employer) is paying $403.16 for the employee and $814.76 for family coverage per month. NO, the big employers are NOT getting a significantly better deal than we are; they are just contributing at a higher percentage rate so the employee feels the pain less. By the way,Southwestern Bell does not buy their insurance cheaper than you do; they simply load the costs of the medical plan on the ratepayers. (In fact, they don’t buy insurance at all, they buy medical services and pay for them with their own money, the same way that insurance companies do) General Motors collapsed under the weight of providing health care to their employees and retirees (again they are self insured, so they are actually paying the cost of care not an insurance premium) If they can’t get an affordable rate, how do you suppose 2,000 or even 20,000 or even 200,000 employees from business employing 2-100 people are going to get an affordable cost? Won’t work! It’s been tried again and again and it flat doesn’t work. But it sounds good on TV.

    No matter how much I’ve tried to get my fellow NFIB members to listen to reason, they would rather assume that big business gets some magical breaks that aren’t available to them. It’s better in their minds to blame their perceived problems on a conspiracy of the powerful or some “ism” than to look seriously at the problem and work intelligently to offset its negatives. Here is what we used to hear all the time “Let small business band together to use their combined buying power to reduce rates the same as big businesses do” There is a big difference between buying reams of paper and medical insurance. The more you buy, the cheaper the premiums do not become. Medical insurance costs a lot. No question about it. No matter whether you have 5 employees or 5,000 it costs a lot. Why?

    You know the Texas Legislature passed that bill and Perry signed it into law three sessions ago. We HAVE buying groups inTexasband together etc etc. Why haven’t you all joined up? Number one, many of you wouldn’t spend ten cents on employee benefits because it comes right out of your bottom line and besides, you don’t need to provide any benefits because 1) your employees are all covered by their spouse’s plan (freeloaders) or 2) your employees don’t want (maybe can’t afford) to pay their share of the premium. But I would strongly suspect that in many cases where the business owner does not provide a medical insurance benefit to her employees it is because she is married to a schoolteacher or an employee of a major business and is personally covered on that plan as a dependent, or she is retired from the government, military, federal, state or local, and has retiree health insurance; thus it is not a matter of great concern to them personally. By the way, how successful are the buying groups authorized by law in reducing premium for Texas small businesses?

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   NOT. Why? Because the premise is flawed. You don’t get cheaper insurance premiums by increasing the pool. It’s a lot more complicated than that.  

   How about Tort Reform? We’ve got it inTexas and have had it for several years. Are your medical insurance premiums lower because of it? Absolutely not. How about this. You are a doctor in private practice, just you and your office staff caring for your patients. Your medical malpractice premiums are $XXXX because of all of the evil trial lawyers. Now we have tort reform, and because we have eliminated all of the frivolous law suits, let's say your premium are cut in half—down to $XX. Great! Now what?  Are you going to post a sign in your lobby, “Great news, patients, now your office visit will cost your insurance company less than it did before, so even though your co-pay remained the same (or increased), I am going to pass my savings along to your insurance carrier in the form of lower professional fees. I am going to take from my insurance company the premiums that I have been giving them and give them to your insurance company and your insurance premiums should go down.” That just doesn’t make any sense. Or how about “Well, folks, all of those tests which I have been ordering all along for you when you come in, I will no longer order because I don’t have to fear you are going to sue me, so eventually, your premiums should go down.” 

   There may be some legitimate reasons to reduce the amount of punitive damages, but reducing your health insurance premiums isn’t one of them. That is a bogus argument. Think of it this way, if your workers comp or general liability premiums go down are you going to reduce the cost of your goods and service to your customers? Why would you expect your doctor to do so?

   Let’s talk about “Buying across state lines” Again, Bogus. I heard Sen. Coburn on CSPAN the other day mouthing that sound bite, and he even said, “We should let people buy their health insurance across state lines the same way that they do their car insurance.”  Shame on you Sen. Coburn! Wrong. You don’t buy your car insurance across state lines. You don’t even buy it across county lines. This bogus argument is being proposed by REPUBLICANS who are (were) the party of states rights and small federal government. Currently your medical insurance (and your car insurance) is community rated. That is, you will pay a premium based on the experience of your area. How can it work to buy your health insurance in Idaho when you live in Houston? How much do doctors make in Idaho? In Houston? Insurance premiums are made up of a lot of factors, but primarily they are reflective of the costs in the area where you live. That’s why they cost more in Dallas and Austin than San Antonio. Wages, rents, taxes, all of that go into the rates medical providers charge for services; thus, the premiums that must be charged to pay them. The individual states regulate the affairs of insurance currently, and have for the past 100 years. To change this would require a large federal bureaucracy. This is where the conservatives want to take this argument?

NOTES: The same month that PPACA became law, our health insurance at the agency renewed. The Blue Cross plan that was mentioned above increaed by 24.3%. The employee cost for the PPO co-pay plan increased from $364.29 to $444.40. THIS HAD NOTHING TO DO WITH THE LAW. Trend (the average increase in medical care costs in our community-Bexar County, Texas) increased the costs by 11.3% and demographics (our ages) increased the cost by an additional 11.9%

What did we do?

We switched to Aetna and our new plan cost was $317.00 per employee for the PPO co-pay plan. This plan renewed on March 1 of this year (2011) at a cost of $398.00. We stayed at Aetna and elected to pay the higher premium. Next year we will probably move to another carrier, depending on the increase we get from Aetna.

What I said in my article is correct: Health insurance is expensive, but as you can see from the above, it is not necessarily more expensive for our group than for a large employer.