Small Biz Gets Health Care Answers

September 6, 2005
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GRAND RAPIDS — Like their larger counterparts, small businesses are looking for ways to hold down health-care premiums and maintain quality health insurance programs for their employees.

The U.S. Small Business Administration recently held a “Web chat” on health care and small business to engage business owners in a national dialogue about cost-efficient solutions to the challenges of employee health-care coverage.

Karen Kerrigan, founder of the Small Business and Entrepreneurship Council, and J.P. Wieske director of state affairs for the Council for Affordable Health Insurance (CAHI), hosted the hour-long discussion in which small businesses owners from about 15 states took part.

Employers know they have to offer health-care coverage in order to stay competitive, grow and attract and retain a quality work force.

“But it seems,” Kerrigan said, “that health insurance costs have gotten beyond our control. Sure, a nip and tuck there, but everything we try to do is neutralized by the shock of yet another premium increase.”

To hold down health-care premiums, Kerrigan suggested that small business owners look into lower-cost plans, especially health savings accounts (HSAs).

A health savings account has two parts: a health insurance policy with a high deductible, and an investment or retirement account from which the account holder can withdraw money tax free for medical care. If not used, the money accumulates with tax-free interest until the holder retires.

“Money that isn’t used stays in the account and may be available for use next year, making next year’s effective deductible even lower,” Wieske explained. “The truth is you are putting less money in the insurance company pocket, sharing more of the risk, and over time almost everyone will win with a health savings account — even those with high medical costs — because the contributions are tax deductible.”

He said HSAs are “very safe” because they are only offered by licensed insurers and the accounts are managed by strong financial institutions, both banks and credit unions.

The fact that nearly 100 insurance companies now offer HSAs demonstrates high demand and strong customer satisfaction, Kerrigan added. More information about HSAs is available at the HSA Coalition Web site at www.hsainsider.com

“Small employers are saving money through HSAs, with recent studies finding savings anywhere from 10 to 30 percent or more,” she noted.

Kerrigan also recommended that business owners look at defining their contribution to the group health insurance plan and, if possible, allow their employees to choose their own plans and pay any difference in premium.

Small business advocacy groups and small business supporters within the U.S. Congress, she said, are now working to advance legislation that would allow trade associations and industry groups to use the power of their numbers to leverage better prices and more choices in offering health insurance plans.

Association Health Plans (AHPs) are meant to provide health-care coverage for small businesses through their industry, trade, professional group, chamber of commerce or similar business associations, allowing them to “pool” and access large group-buying opportunities.

AHP legislation is now moving through Congress. The U.S. House of Representatives passed HR 525, the Small Business Health Fairness Act for 2005, on July 26. The act amends the Employee Retirement Income Security Act of 1974 to provide for establishment and governance of association health plans. The bill would require that an AHP approved in any state be accepted in every other state and the District of Columbia. It’s the eighth time the House has passed such a resolution, but it has yet to gain Senate approval.

Kerrigan encouraged participants to contact their senators and ask them to co-sponsor and support SB 406, the Small Business Health Fairness Act.

“Larger businesses and labor unions can operate under uniform federal guidelines to offer their employees and members more choice in plans, and at more affordable prices,” she said. “Why shouldn’t small businesses be able to do the same?”

She noted that opponents of the legislation — insurers — are concerned about competition and a restructuring of the market, and therefore have been a powerful voice against AHPs.

“The Senate can act this year and President Bush has been encouraging them to do so. However, it appears that the Senate will not act unless they believe it’s a priority to do so — that’s where you and other business owners and entrepreneurs come into the picture.”

According to Wieske, there’s also a “clear trend” toward consumer-directed health plans (CDHPs) among small businesses, and it’s a trend that will help get small businesses out of the business of micromanaging benefits.

“It empowers consumers to control their care — not insurance companies,” he said.

CDHPs are designed for employers that self-insure health benefits. Basically, with a CDHP, employees have personal tax-free medical savings accounts that they draw on to pay routine medical expenses. CDHPs have high deductibles that employees are required to cover. Money in the accounts can be rolled over from year to year.

“When people have control over their own resources and money to shop, the market becomes more price sensitive, which will help bring down costs,” Kerrigan added. “The movement toward CDHP is a good one.”

She said that besides complaints about escalating health insurance costs, the most common complaint she hears from small business is that there is no choice.

“There is a limited choice of plans with limited opportunities to design the type of plan small business owners and their employees want or need,” she said. “The answer is more competition.”    

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