The rising tide of healthcare

WASHINGTON — Small business health plans were shelved May 11 to the chagrin of the American Veterinary Medical Association. But opponents say the proposal will do little to aid the millions of uninsured Americans and could actually raise the cost of healthcare premiums in the long term.

Formerly dubbed the association health plan proposal, the Health Insurance Marketplace Modernization and Affordability Act passed out of committee for the first time in 11 years, but the Senate could not make it filibuster proof, so it was never brought to the floor for a vote by the full chamber.

The legislation could lower the cost of healthcare premiums by allowing associations to amass insured lives into a larger pool for bargaining power with insurers.

Bill sponsor Sen. Mike Enzi, R-Wyo., introduced S.1955 as a compromise bill to alleviate its predecessors' sticking points, which revolved around state regulation. Enzi's proposal would require insurers to be licensed in every state where it enrolled participants into small business health plans. Subsequently, insurers would continue to be regulated by state insurance commissioners and subject to all state laws with the exception of mandate and small group market premium rating rules explicitly addressed in the bill.

Although the concessions helped build dialogue among those who support and oppose this type of legislation, Democrats refused to support the bill without adding its own reportedly unrelated health amendments that included extending the enrollment deadline for the Medicare prescription drug benefit, permitting the purchase of lower-cost prescription drugs from Canada and expanding federal funding for embryonic stem cell research.

Still, the bill has advanced further than it has in more than a decade and brought the insurance companies to the table, major steps in the right direction, says Katie Strong, Healthcare Policy Director for the U.S. Chamber of Commerce.

"This bill is not dead," she says. "There are folks, including Sen. Enzi, who would like to see it come up again in this session, and I think (senate majority leader) Sen. (Bill) Frist has said that if we can make the changes to the bill that will get us those few extra votes that we need, then he will bring it up, so we haven't stopped working on it."

Short of reintroducing the bill, Sen. Enzi says he will continue to work on small business health plan legislation via amendments to bills more likely to grace the Senate floor.

AVMA supports small business health plans because it would open the door for additional insurers to compete in markets they are not currently established. That competition likely will lower healthcare premiums, says Dr. Robert Nichols, assistant director of the AVMA Governmental Relations Division.

According to the Congressional Budget Office (CBO), small business health plans could reduce health insurance premiums by as much as 13 percent and provide health benefits to as many as 4.2 million Americans. However, it says many of those employees would have been offered health insurance under current arrangements, and much of the savings in premiums would be a result of plans that offer fewer benefits. "On balance, about 330,000 more people would be covered through small-firm employment than would otherwise have been the case," the CBO reports. Although that represents a 1.3-percent increase in coverage through small firms, it likely isn't enough for those lobbying for the about 44 million Americans currently uninsured.

"A lot of people who are against this legislation are probably the same people who want to see the government pay for universal healthcare," Nichols says.

Those opposed

Patient advocacy groups, state attorneys general, state insurance commissioners and medical provider organizations top the list of those fighting to keep associations from organizing across state lines.

American Cancer Society and the American Diabetes Association say the proposals will create second-class health insurance policies that will cherry pick the best risks and leave the state-regulated insurance markets with only the worst risks.

The American Association of Health Plans (AAHP) agrees, calling it a "further segmentation of the group market," says Larry Akey, AAHP spokesperson.

"You can't create a large group market by having a number of small groups combine; the administrative costs are going to be the same whether an individual or a small group is part of the association health plan or not," he says. "So the only way that premiums can be lowered is by allowing groups that join the association health plans to have a different set of regulations and mandated benefits than those left behind. Then again, the concern is that by having a less-rich policy in the association health plan market in terms of benefits, that a likelihood will be that it will attract healthier groups, leaving sicker groups behind in the remaining small group market, and that will cause premiums to rise rather than fall."

Akey says small businesses looking to hedge healthcare expenses should divert some of the premiums back to employees. So-called high-deductible health plans (HDHP) are all the rage with insurers as spiraling healthcare inflation dwarfs many businesses' ability or will to pay for 100 percent of employee premiums.

Veterinary consultants say premium sharing might be inevitable for many veterinary practices. Brakke Consulting's Karen Felsted, CPA, MS, DVM, CVPM, says healthcare inflation has risen to the point where many practices already need to share 10 percent to 25 percent of premiums with employees.

"It's a challenge because you have to stay competitive benefits wise in the marketplace," she says. "If you are shifting, that might not always be a popular move, but it's reality, to some extent."

Health Savings Accounts (HSA) and Health Reimbursement Arrangements (HRA) have been the most popular mechanisms thus far for encouraging employees to take more responsibility for their healthcare decisions. Basically, the health plan credits an account with part of the employer-paid premium; then the plan requires an employee-paid deductible to be met out of the HSA. The insurance kicks in only after the deductible is met, typically about $1,000 for an individual and 2,000 for a family. If less money resides in an HSA, then the deductible must be met out of pocket.

Akey says it forces consumers to think about the cost of healthcare as a finite commodity instead of a blank check, and it could prompt more people to request generic pharmaceuticals and shop around for elective surgeries to "get the best value possible."

Shifting burdens

But many are concerned that shifting the cost of care to help businesses will hinder an already ailing labor force, whose salary and wage increases are far lower than the rate of inflation. Since the American recession ended in November 2003, real wages (after adjusted for inflation) have dropped more than $10 a month, according to the Economic Policy Institute. Combined with surging fuel prices and now a growing expectation to shoulder healthcare expenses, and many worry that line-level workers will just drop healthcare altogether rather than bear the brunt of another expense.

"It seems like any employee can pick up $50 a month, but for someone who makes $25,000, that's a pretty big issue," says Felsted, who is also an editorial adviser to DVM Newsmagazine's sister publication to Veterinary Economics.

The country's CEOs are worried about it, too. A Robert Wood Johnson Foundation survey revealed concerns from about 79 percent of business owners who fear their employees would drop healthcare coverage as the burden continues to shift.

But it's clear that small businesses can't do it on their own. About 68 percent of small businesses offered health insurance in 2000; just 59 percent offered policies in 2005, according to the Kaiser Foundation 2005 Annual Employer Health Benefits Survey.

About 77 percent of veterinary practices offer health benefits, according to the National Commission on Veterinary Economic Issues.