Reduce Health-Care Costs, Small Businesses Tell Congress

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By Sara Hansard

Small employers continue to drop health insurance coverage for employees as Obamacare has failed to control underlying health-care costs, small business representatives told a congressional committee Feb. 7.

The Affordable Care Act “was primarily about expanding access” to health insurance, not reducing costs, Tom Secor, a small business owner from Ohio, testified on behalf of the National Small Business Association before the House Small Business Committee. “Efforts should be made to prioritize health-care cost containment and reduce the rate of medical utilization while improving health-care quality and empowering consumers.”

Many small businesses have experienced premium increases and more regulation since the primary provisions of the ACA took effect in 2014. Looking at proposals to change the law, the small business leaders supported encouraging health insurance sales across state lines, which has been called for by congressional Republicans and President Donald Trump. State insurance regulators have expressed concerns about the idea, arguing it could result in state regulations being preempted so insurers could sell plans that don’t adequately protect consumers.

Number of Health Plans `Dramatically’ Decreased

The ACA has resulted in coverage for more than 11 million Americans who wouldn’t be covered without the law—people with pre-existing conditions and low-income people, Keith Hall, president and chief executive officer of the 150,000-member National Association for the Self-Employed, said. But “the number of actual health plans has dramatically decreased,” with many areas only having one ACA option, he said.

“Considering opening up interstate ability to expand some plans may give more options,” Hall said. House Speaker Paul Ryan’s (R-Wis.) Better Way health-care plan says that “Current law obstructs people from purchasing a plan licensed in another state. Our plan would fix this problem, increasing competition among plans and freeing Americans to purchase plans licensed in other states.”

America’s Health Insurance Plans (AHIP) hasn’t taken a position on interstate health insurance sales, spokeswoman Kristine Grow told Bloomberg BNA Feb. 7. But it isn’t clear how insurers could build provider networks that would be valuable to consumers in different states, she said.

Questions Over State Authority

Questions remain about which state regulators would have authority over plans, as well as what impact interstate plan sales would have on risk pools, Grow said. Plans from states that allowed fewer benefits may attract healthier consumers in states that generally required more benefits, which could result in higher premiums for consumers in more comprehensive plans, she said.

The ACA allows compacts among states for interstate sales beginning in 2016 if they are approved by the Department of Health and Human Services, but no regulations have been issued to implement the provision, Grow said. A Jan. 3 report by the National Conference of State Legislatures shows “a gradually growing number of states (at least 21 as of December 2016) and state legislators considering this idea during the past eight years.”

In late 2015, a National Small Business Association survey found that 41 percent of companies with up to five employees offered health benefits, down from 46 percent in 2014, and 65 percent of small companies (those with fewer than 500 employees) reported offering health insurance in 2015, down from 70 percent in 2014, Small Business Committee Chairman Steve Chabot (R-Ohio) said. “Doing nothing is not an option because the current system is in a death spiral,” he said. “Every day the Obamacare mandates remain on the books is a day where it gets harder for small businesses to make their books.”

Decline in Number of Uninsured Employees

But committee ranking member Nydia Velazquez (D-N.Y.) said the number of uninsured small business employees dropped by 4.1 million from 2013 to 2015, declining from 27 percent to less than 20 percent. “These individuals not only gained insurance coverage, they gained high quality insurance coverage,” she said.

Before the ACA, one employee’s expensive illness could cause insurers to dramatically raise rates for the entire company, Velazquez said. “Now, insurance companies are not allowed to charge higher premiums based on health status, insurance claims, or gender,” she said. In addition, the ACA has given entrepreneurs greater freedom to start their own businesses without worrying about not having access to health insurance, she said.

“Small businesses have long struggled to provide health insurance to their workers, facing high and often volatile premiums,” Dania Palanker, assistant research professor at Georgetown University’s Center on Health Insurance Reforms, testified. Those pressures contributed to a “steady decline” in the number of small businesses offering coverage before the ACA was enacted in 2010, she said.

The ACA sought to address problems in the small group market by establishing national minimum standards for core essential health benefits that must be covered, including maternity care, prescription drug coverage and preventive services, Palanker said. Moreover, small business health costs are growing more slowly than they did before the ACA, she said.

New Requirements Drove Up Costs

But Kevin Kuhlman, director of government relations at the 325,000-member National Federation of Independent Business, testified that the ACA’s new insurance requirements and taxes drove up plan costs.

Only 6 percent of small employers received an advance premium tax credit subsidy in the individual exchange marketplace, and many of the 9 million unsubsidized individuals in the broader individual market are small business owners, Kuhlman said. Few small businesses qualified for the ACA’s small business health insurance tax credit, which expired last year, he said.

Kuhlman called for reversing Internal Revenue Service regulations issued under the Obama administration that limited employer reimbursements to employees to purchase their own health insurance with tax-deferred dollars, and allowing employers to keep plans that don’t comply with the ACA.

To contact the reporter on this story: Sara Hansard in Washington at shansard@bna.com

To contact the editor responsible for this story: Casey Kendra Plank at kcasey@bna.com

For More Information

Information on the House Small Business Committee hearing, Reimagining the Health Care Marketplace for America’s Small Businesses, is at http://src.bna.com/l3q.

Tom Secor's testimony is at http://src.bna.com/l3r.

A National Association of Insurance Commissioners fact sheet, Interstate Health Insurance Sales: Myth vs. Reality, is at http://src.bna.com/l3s.

Keith Hall's testimony is at http://src.bna.com/l3t.

House Speaker Paul Ryan's Better Way health care plan is at http://abetterway.speaker.gov/?page=health-care.

The National Conference of State Legislatures report, Out-of-State Health Insurance - Allowing Purchases, is at http://src.bna.com/l3u.

The National Small Business Association's 2015 Small Business Health Care Survey is at http://src.bna.com/l3v.

Chairman Steve Chabot's opening statement is at http://src.bna.com/l3z.Dania Palanker's testimony is at http://src.bna.com/l3w.

Kevin Kuhlman's testimony is at http://src.bna.com/l3y.

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