On June 24, the House Education and the Workforce Subcommittee on Employer-Employee Relations held a hearing to examine innovative health insurance options for workers and employers. Chair Sam Johnson (R-TX) opened the hearing, saying, “With annual double-digit health care cost increases over the last few years, employers are faced with the question of how they will continue voluntarily providing the high level of quality benefits they have in the past. Essentially, they have three options: reduce benefits, ask employees to contribute more, or reexamine their workforce.”
William Dennis, Jr., senior research fellow with the National Federation of Independent Business (NFIB), said that between 2002 and 2003, the cost of health insurance rose 15.5 percent for small businesses. Mr. Dennis said, “That means the average total cost of health insurance for a 10-employee firm (half individual coverage and half family coverage) rose on the order of $8,200.”
In discussing alternatives for small businesses, Mr. Dennis told the subcommittee that small businesses have a limited number of options when facing increased health costs: “The first small employer reaction to a substantial increase in premiums is to start shopping around for a new plan, new carrier or even a new insurance agent/broker. Kaiser/HRET reports that in 2003, 62 percent of those employing between 3 and 199 people shopped for a new health insurance plan; 33 percent switched.” The second alternative is the use of “non-traditional mechanisms” such as Flexible Spending Accounts (FSAs), Medical Savings Accounts (MSAs), and reimbursement for some or all of privately purchased health insurance. “About 13 months ago, an estimated 9 percent of small employers with between 1 and 249 employees offered a flexible spending account, 5 percent MSAs, and 13 percent some type of reimbursement. Large, small employers were more likely to offer each than smaller, small employers,” he said.
Mr. Dennis also noted that “the most common response to health insurance cost increases is to shift at least a portion back to employees in the form of greater cost sharing, higher deductibles and/or higher co-pays.” Again, “Kaiser/HRET reported that in 2003, 27 percent of small employers increased their cost share (65 percent of employers with more than 200 employees did), 24 percent hiked their deductibles, and 26 percent raised the co-pay for an office visit.”
Pointing to a report released last week by Families USA, Executive Director Ron Pollack said that “in a two-year period, 2002-2003, approximately 82 million people—one out of three Americans who are not eligible for Medicare—were uninsured for some period of time.” Adding that the majority of the uninsured were employed in low-wage jobs, Mr. Pollack shared some additional data:
Mr. Pollack also said that “the growing number of Americans without health insurance is now a phenomenon that significantly affects middle class and working families,” adding that a “quarter (25.2 percent) of working individuals and their families with incomes between 300 and 400 percent of the federal poverty threshold (from $55,980 to $74,640 a year for a family of four in 2003) were uninsured at some point over the past two years.”
Commenting on proposals aimed at expanding coverage, Mr. Pollack said that health savings accounts, tax credits, and association health plans “do little to expand health insurance coverage to uninsured Americans and threaten the stability of employer-based coverage.” Rather he offered four alternatives proposed by Families USA: reinsurance assistance for small businesses, tax subsidies for unemployed workers to purchase COBRA or other group insurance coverage with consumer protections, tax credits for small businesses offering health insurance coverage to low-wage workers, and modernization of public safety net programs.
Rick Remmers, chief executive officer of Humana-Kentucky/Indiana/Tennessee, testified on behalf of America’s Health Insurance Plans (AHIP). He touted “consumer choice products” such as FSAs, Health Savings Accounts (HSAs), and Health Reimbursement Arrangments (HRAs). “By giving workers more control over funds allocated for their health benefits, workers will be more engaged in how they spend their money. This is especially true once a worker becomes more educated about the actual cost of health services,” he said. Additionally, he noted that “as health insurance plans and employers gain experience with consumer choice plans, the pace of product innovations will increase.” Mr. Remmers cited Humana’s SmartSelect product: “Using sophisticated but user-friendly web-based tools, workers compare costs and benefits, estimate their total health care spending, and customize their plan by selecting varying levels of copayments, coinsurance and premium costs, as well as prescription benefit options.”
Mr. Remmers also told the subcommittee that AHIP member companies are working to improve health care quality through the use of evidence-based medicine, disease management (DM), predictive modeling, wellness and prevention, and quality recognition. “Virtually all health plans have implemented disease management programs. Ninety-nine percent of health plan enrollees are offered a DM or chronic care program for diabetes; 93% are offered a DM or chronic care program for congestive heart failure; and 82% are offered a program for asthma.”
To further aid consumers, Mr. Remmers urged Congress to enact legislation that would allow individuals to roll over $500 in unused FSA funds each year. The House passed similar legislation (H.R. 4372) this week and in May (see The Source, 5/14/04).
