Small Business Health Insurance Coverage: A Sobering Report From the Trenches

One of the things I enjoy the most about my travels across the country is meeting benefits brokers and health plan sales reps--they have the best feel for the real market and what their customers and their employees are up against.

This very sobering and, from what I independently hear, accurate report about the small group health insurance market comes courtesy of Brian Klepper. Please note the impact consumer driven plans are having.

Small Business Coverage: A Report From the Trenches
by BRIAN KLEPPER

John Sinibaldi, a well-respected health insurance agent in St. Petersburg, FL , has become prominent in Florida's broker community because he not only counsels and services a large book of small business clients, but because he also studiously tracks the macro trends that impact coverage for this population. And he's active in the state's regulatory and legislative activities.

The other day I dropped him Jane Sarasohn-Kahn's post that reported on International Foundation of Employee Benefit Plans' survey showing that most employers still want to be involved with health care. John responded with a long description of what the small employers he works with are up against. Its an illuminating, damning piece. I asked him whether I could post it, and he graciously agreed.

Often the discussions on sites like this are dominated by people who understand health care's problems deeply but abstractly. For John and his employers, buying health care is a stark, concrete problem that boils down to cutting care arrangements that are affordable for the employers and employees. As he describes it, it's an increasingly impossible task.

John notes that only 36% of Florida's small businesses - defined in the health insurance market as employers with 2-50 employees - now offer coverage. This is significant, since 95% of Florida businesses are small. Nationally, about one-third of all employees work for firms with fewer than 100 employees.

The increasing pressure on small business may explain why, as I pointed out the other day, even the arch-conservative National Federation of Independent Business (NFIB) recently co-sponsored a reprise of the Harry & Louise health care reform ads, this time advocating for, rather than against, universal health care. Last time, they were part of the coalition that killed the Clinton's reform effort.

And finally, Mr. Sinibaldi's message should drive home a key point, echoed by Shannon Brownlee and Zeke Emanuel in the Washington Post over the weekend and Bob Laszewski's post yesterday. To be successful, the expansive health care reform discussions that typically dominate in DC MUST go beyond the Massachusetts and California reform efforts. Approaches that can address waste and cost are just as important as those relating to universal coverage. Otherwise the resulting solutions will continue to be out of reach to a sizable portion of the American people, and the underlying driver of the crisis, out-of-control cost, will remain untouched.

Here's John's letter.

I've got news for the folks doing the IFEBP survey: Smaller businesses, especially those defined as true small businesses (2-50 FT employees), are strapped beyond belief when it comes to paying ever-higher premiums for health care. The survey's results are NOT indicative of what is happening in the small group market (much like the Kaiser Family Foundation's (KFF) annual survey on total premium and the portions shared by employees, which always makes me laugh. The employees at my businesses would kill to have the low percentage of total premium passed on to them that is reported in the KFF survey).

Across the board, the 100+ businesses I represent, all of them 2-50 full time employees, have received increases between 13%-75% this year. The average has been around 20-24%. That's on top of 15+% average increases last year, 15+% increases the year before, and the year before that.

Some of those increases have been mitigated by moving to High Deductible Health Plans (HDHP), but we didn't get premium savings by doing so, we only leveled premiums for a year or so. Now, the underlying increases are causing the HDHPs to rise just as fast (and maybe even faster; more on that in a minute), so employers are moving toward ever bigger deductibles.

Just five years ago, average deductibles for my employers who had deductibles (many were still on straight copay HMOs) were in the $500-$1000 per covered member range.

Now, I have only a handful of employers still on HMOs, and they have huge co-pays, like $1,500 inpatient hospital co-pays or large deductibles just like the more traditional insurance plans. Most deductibles range from $2,000 per covered member to as much as $10,000 for a cumulative family deductible. And many of those are HDHPs, with no benefit for covered sickness or injury or prescription benefits, until the deductible is met. Even with these plans, premiums are simply too high for many low-wage and middle-income folks to pay.

Most of my small businesses have been frightened to death by the health care industry's warnings against governmental intervention. The most common remark I receive is "I don't want government involved in my health care!" However, the second most common remark I am receiving now is "I don't know how much longer I can pay for this. Frankly, the government can't do any worse."

I have an unremarkable quote in a November 17 WSJ article - "Now the insurers are catching up." - on the coverage problems facing small business. What I meant to convey to Ms. Fuhrmans, the reporter, was that the premise that Consumer Directed Health Care would give consumers more skin in the game and slow the rise in health care costs was, and remains, a myth.

I represent the two businesses profiled in the article. Their experiences are not anomalies in the small group market. Rather, they are indicative of the dramatic health insurance changes that have affected small businesses. Just five years ago, one of the businesses had a very traditional PPO product, with low copays, low out-of-pocket expenses for major medical claims, and low-cost prescription drugs. The other employer also had relatively affordable costs, both for themselves and their employees. More importantly, both businesses felt that, while expensive, the costs to them and their employees was not egregious.

Fast forward to today. Both businesses feel that they're being hosed on their health care costs. They don't care what is behind the cost increases. It also makes no difference which carriers are involved, as all struggle with rising costs and ultimately pass those costs on to employers and their employees. The employers only know that the current rate of increase (for premiums, for payroll deductions for the employees' portions, and for out-of-pocket expenses at time of claim) is simply unsustainable.

Unsustainable. Think about it. Only some 36% of small businesses in Florida still offer coverage - this is far less than the national average of 52% - and that number continues to plummet.

So an increasing percentage of small businesses now feel that governmental intervention of ANY kind is preferable to the present untenable situation. In the small group marketplace, the pinch has been here for a long time, and has turned into a hard squeeze. Soon, it will squeeze the life out of the markets - at which point the small group market will implode.

At this point, the current system only works for affluent employers, who can still pay the exorbitant premiums but who don't pass the bulk of that cost along to their employees. It also still works for businesses with high-income employees who can absorb the cost. That typically means larger businesses; institutional purchasers like local, state and federal government organizations. It works for purchasers with enough capital and revenue to offset the bulk of the costs, whose employees haven't yet felt the "pinch" of high health care costs.

An interesting and often overlooked sidenote is that, in almost all surveys of employee satisfaction, employees of larger employers and those employers that pick up the bulk of the premium are typically more satisfied with the current system than employees in small businesses, which are often not included in such surveys.

Finally, the most popular plans I now sell to small businesses? A flat $5,000 individual/$10,000 family deductible HDHP (no carrier responsibility for anything other than pure preventive until the deductibles have been met). A similar $1,500/$3,000 HDHP is also popular. I very rarely sell more traditional PPO co-pay plans, since the businesses I represent (mostly light industry and service) can't afford them.

Is the Bush Administration in Favor of Provider Transparency and Accountability or Aren't They?

Brian Klepper has shared an open letter he and Michael Millenson have written to HHS Secretary Leavitt regarding the issue of provider information transparency and the Department of HHS's apparent contradiction with its own policies.

An Open Response To HHS Secretary Michael Leavitt
by Brian Klepper and Michael Millenson

A few months ago, the two of us – both long-time advocates for transparency and accountability – posted separate comments on Secretary Mike Leavitt’s blog. Brian asked Secretary Leavitt to square his support of "Chartered Value Exchanges” with the attempt to block release of physician-specific Medicare claims data to Consumers’ Checkbook, which wants to rate doctors. After a court ruled that the data should be provided to the group, HHS appealed. Michael urged the secretary to go beyond supporting Consumers’ Checkbook and use his “bully pulpit” to promote sophisticated data analysis that could be used to create national quality comparisons.

Secretary Leavitt graciously asked us to consider and comment on the department’s proposed "Medicare trigger legislation" calling for the release of physician performance measures. We are delighted to continue the conversation.

First, let’s give credit where credit is due. We agree that the proposed legislation is a major step in the right direction.

Yet the legislation’s intent seems at odds with the department’s turn-back-the-clock arguments in Consumers’ Checkbook vs. HHS. There, the department asserts that physicians have a right to privacy, and that the quality of medical care they provide in return for taxpayer dollars does not have to be disclosed — despite its importance to consumers and other purchasers of care. Interestingly, this privacy is a privilege hospitals do not enjoy.

In a December 10, 2007 American Medical News article (since revised), the American Medical Association’s board chair gloated that HHS had taken the AMA's “advice” in appealing the original August 22, 2007 District Court ruling for Consumers’ Checkbook. Moreover, as the Los Angeles Times pointed out, while the department proclaims in press releases that it simply wants legal clarification on its authority to release the physician data, the government's legal brief in the case calls for the appeals court to reverse [the August] ruling, leaving the restrictions on the release of data in place.

This is not a partisan issue. Most objective health care experts across the political spectrum believe that transparent pricing and quality information is critical to transforming the current crisis-ridden system into one that is stable and sustainable. Without the kind of information sought by Consumers’ Checkbook, a health care marketplace simply cannot function. President Bush virtually said as much in his August, 2006 executive order.

HHS has said it “recognizes and shares the goals of Consumers’ Checkbook.” If that is so, HHS should match words with deeds. That means dropping its appeal of the Checkbook ruling and challenging purchasers, health plans and individual consumers to use the marketplace to reward doctors and others who provide or contribute to safer, higher quality, more efficient care.

Respectfully,

Brian R. Klepper, PhD
Healthcare Performance, Inc.
Atlantic Beach, FL
904.246.9643o
bklepper@gmail.com

Michael L. Millenson
Health Quality Advisors LLC
Highland Park, IL
847.681.1476
mm@healthqualityadvisors.com


Secretary Leavitt's Original Response to Brian and Michael:

Claims Data from Medicare

The proposal I made last week is also relevant in another way. A couple of commenters asked about a lawsuit involving the use of Medicare claims data by people outside of government.

Brian Klepper said: “On Friday the Memphis Business Journal reported you saying that we ought to have ‘a Travelocity for health care’ that would ‘give a quality grade for doctors and show how much they charge for services.’ I'm wholeheartedly with you on this. But how do you square this proposal with the fact that, though you're the nation's largest payor, you acquiesced to the AMA's interests and then refused to release physician data?

Can you please explain these discrepancies?”

Michael Millenson of Highland Park, IL agreed with Brian. He said, “It's past time for HHS to be an aggressive, whole-hearted mover towards release of more information and more timely information. Meanwhile, one easy, no-cost step would be for Secretary Leavitt to use his bully pulpit to call for states to collect ‘all payer’ data. It sounds like a technical issue, but what it will do is allow valid national comparisons of quality of care, as well as enable better state efforts. A local/nation win-win.”

I want to use Medicare claims data for this purpose. And I have been advocating the states provide their data for this purpose. However, I have a problem. A federal court in Florida, some years ago, prohibited HHS from publicly disclosing certain Medicare claims data. Specifically, HHS was prohibited from disclosing annual Medicare reimbursement rates for individually identifiable physicians.

A few months ago, another federal court — this time in D.C., ruled the opposite — that I must provide the data to a specific party. This leaves me sandwiched between two differing courts.

We are working to develop a solution. However, the real fix will need to be legislative.

In the Medicare trigger legislation I sent to Congress, I have included language that would allow HHS in a thoughtful, consistent way to enhance quality improvement efforts in our Chartered Value Exchanges with physician performance measurement results. This needs to happen. I think there is a potential for bipartisan action on at least this part of the legislation I sent up.

Michael and Brian, take a look at the legislation linked above and tell me what you think.