A Solution to the Small Business Health Care Crisis By Senator Blanche Lincoln (D-AR)
Article Date: 07-01-2008
Copyright(C) 2008 Associated Equipment Distributors. All Rights Reserved.
Bipartisan legislation would help lower costs by encouraging companies to band together in health insurance plans.
Editor's Note: AED's Washington Office provides some excellent member tools for becoming active in public policy. At www.aednet.org/government you can learn more about top legislative priorities for our association and even connect with your own representatives to voice your opinions as a business owner in their district. In addition, below we've posted more details about the proposed legislation Sen. Lincoln discusses in this month's guest column.Joe Wortsmith is a small business owner from Little Rock, Ark., whose company specializes in the manufacture and distribution of laser tools. Joe has been offering health care to his seven employees for the past 12 years. He believes in offering good benefits because, he says, "You must be competitive or else you will lose good folks." Unfortunately, the cost of providing health care coverage is rising at an alarming rate. Joe has not seen a decrease in his health insurance coverage costs since he started his business in 1993. He recently discovered that the cost of his employees' premiums will increase nearly 11 percent next year. Faced with that reality, Joe may be forced to decrease the percentage his company contributes towards employees' health insurance premiums. By passing these costs on to his workers, he fears he could lose valuable employees who have been with him for a long time.Joe's story illustrates the growing health care crisis small business owners and the self-employed face. An estimated 47.1 million Americans are currently uninsured. Although small businesses are the No. 1 source for jobs in my home state of Arkansas, only 26 percent of businesses with fewer than 50 employees offer health insurance. Businesses that do offer coverage are finding a system that no longer works for them. They don't want to scrap the employer-based system, but it needs to make economic sense.In response to the small business health care crisis, I have worked with colleagues on both sides of the aisle to introduce the Small Business Health Options Program Act of 2008, known as SHOP. It has broad support across the political spectrum, including Associated Equipment Distributors, the National Federation of Independent Businesses, the National Association of Realtors, and the Service Employees International Union.I understand that AED's 2008 Government Affairs Survey identified small business health insurance accessibility and cost as a top legislative priority for equipment distributors. I believe SHOP takes a common sense, bipartisan approach to providing health care coverage for small businesses and the self-employed by addressing the problems they face:
Small businesses and the self-employed are the backbone of our communities, and it is time that we give them the tools to improve the overall success of their businesses and the quality of life of their employees. We cannot solve this problem overnight, but by looking for reasonable solutions to our nation's health care crisis, we can help the working men and women in communities across our nation sleep a little easier knowing their health is covered.
SHOP allows small businesses and the self-employed to obtain better health care at a lower price by encouraging them to band together in a statewide or nationwide pool and spread the risk over a large number of participants.
SHOP protects small business owners by making it illegal to base insurance rating on health status or claims experience.
SHOP helps small businesses and the self-employed understand their options by recognizing the different needs of employees and providing comparative information about private plan options.
CED Web Exclusive: SHOP Helps Small Businesses Find Affordable Health InsuranceTax credits to reduce the cost of health insurance: SHOP will provide a tax credit to small employers (including the self-employed) to help offset the cost of health coverage.
More stable and affordable premiums through rating reforms: SHOP's rating reforms will make premiums more stable from year-to-year and more affordable for those who need coverage the most.
- Small employers who pay at least 60 percent of the premium will receive a tax credit of up to $1,000 for each covered employee ($2,000 for family coverage). The full credit will be available to the smallest employers (10 or fewer employees) and will be phased down as the size of the employer increases (up to a maximum of 50 employees). A bonus credit will be available for employers who pay more than 60 percent of the premium.
- Since self-employed individuals pay 100 percent of the premium, they will receive a tax credit of $1,800 ($3,600 for family coverage).
Administrative cost savings: Health insurance will be provided more efficiently.
- Health status rating will no longer be permitted in the SHOP pool and in state small group markets beginning in 2011, which will eliminate the large premium hikes that small businesses often face when even one employee experiences a serious illness.
- The variation in premium rates that insurers can charge will be reduced over time for plans sold through SHOP, so that small businesses will be better able to afford coverage without facing as much of a competitive disadvantage if they have older workers. A tax incentive will encourage states to adopt similar reforms in their state markets.
- The self-employed will be able to participate in the SHOP pool with protection from the practices in the individual insurance market that allow insurers to permanently exclude coverage of preexisting conditions, charge more for minor health problems, or deny or refuse to renew coverage altogether.
Simpler shopping: SHOP will give employers and employees an easier way to find coverage.
- SHOP will encourage statewide purchasing pools and will offer a nationwide pool beginning in 2011. These pools will reduce administrative costs by providing a more efficient way for insurers to market their health plans and for employers and employees to enroll in them. Today, 20 to 25 percent of a small business' premium goes to administrative costs instead of benefits, compared to 10 percent for large employers.
Expanded choice: SHOP will offer new insurance options.
- Statewide and national purchasing pools will offer more health plan choices, facilitate plan comparisons, and provide one-stop shopping for small businesses. Today, obtaining price quotes is difficult and time-consuming, often requiring that a business have its employees fill out complex medical underwriting forms. Through SHOP, information about premiums, benefits, quality and consumer satisfaction will be available on a Web site to facilitate comparision shopping and encourage insurers to offer their best rates. Trade assocations and unions may also serve as "navigators" to assist with enrollment.
- SHOP's nationwide purchasing tool will offer private health plans that cover the entire nation, in addition to plans that operate only in a single state or area. These new plans will still be subject to state insurance regulation to protect those who choose them.
- In many states, individual employees will be able to choose their own health plans.
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