This article first appeared in the St. Louis Beacon, Nov. 17, 2009 - Ask small business owners about the U.S. House's health-reform legislation, and some will say it will take them a while to wade through the proposal. That's understandable because the bill is 2,000 pages long and filled with lots of jargon, such as "health-insurance exchange" and "bundling."
But they should pay close attention to the jargon. Decoded, it will reveal an unprecedented House effort to make health insurance more affordable for small firms and their workers, says Terry Gardiner, national policy director for the Small Business Majority, which has studied small business insurance issues in 14 states, including Missouri.
Gardiner acknowledges that many small business owners simply don't like the bill, and he concedes that the measure isn't perfect. But Gardiner says the legislation will slow the increase in health-care costs, which have risen two to three times the rate of inflation in the past decade.
The costs are "going through the roof. That's what's really causing the problem" Gardiner said. "Unfortunately, the reforms don't bring down the rate of inflation enough."
The bill, says Gardiner, would help restrain cost and make insurance affordable by:
* Phasing out the fee-for-service model in favor of "bundling."
The House legislation would switch payments to what's known as bundling. It means that payments for treating a patient for a particular illness would be bundled into one charge rather than a separate fee for each visit and test.
Economists who have studied the fee for service approach "concluded that it promotes more MRIs, more X-rays, more prescription drugs because the more MRIs and other services providers perform, the more money they make," Gardiner says, adding that Congress projects that a shift to bundling would help bring down the cost of care.
President Barack Obama made a similar point last summer when he told doctors the federal government needed to "bundle payments so you aren't paid for every single treatment you offer a patient with a chronic condition like diabetes, but instead are paid for how you treat the overall disease."
* Restricting insurers' practice of charging higher premiums because of age or pre-existing conditions.
While not eliminating the practice, Gardiner says the House bill would reduce the 5-to-1 ratio to 2-to-1. "It's quite an improvement," he says.
* Developing health-insurance exchanges.
Insurance exchanges, Gardiner says, allow small businesses (fewer than 100 workers) to reap the savings available to big companies. Small businesses pay an average of 18 percent more than large firms for health insurance because of their limited choice in health plans, high administrative costs and lack of purchasing power. Exchanges allow small businesses to become part of pools to shop for affordable health plans.
Being part of an insurance exchange will mean "you're going to have bargaining power, and insurance companies will compete for your business. That's the biggest single part of reform that will help small businesses," Gardiner says.
* Setting up a national system for electronic medical records.
The nation's 5.5 million veterans already enjoy this system, Gardiner says. "When veterans go to a doctor, hospital or clinic, their records are there. The doctor can pull up the records, review the veteran's whole history. This will make the health care system more efficient and save a lot of money."
GOOD FOR MISSOURI?
Depending on who's talking, the House legislation is just what the doctor ordered -- or a poison pill for Missouri's small businesses.
One who takes takes a dim view is Jim Henderson, president of Dynamic Sales of St. Louis. His company has about half a dozen employees, all of whom are offered health insurance and pay 30 percent of the premium. The employee must pay all the premium costs for family members.
Henderson says he wants people to have insurance, but premiums at his 43-year-old firm have risen 150 percent in just over a decade -- plus "I just got my premium notice for January. We're going to just swallow another 11 percent increase in our rates and be happy about it."
Henderson says the insurance-pool proposal is a ploy.
"If they were serious about that, they would have set it up several years ago when (businesses) were proposing it. We were fought tooth and nail" by Democrats in Congress and by a major insurer.
"They're offering it now to try to get small business to go along with what otherwise is a troubling bill because it has mandates that tell us how we have to provide insurance and what benefits. This type of unfunded mandate always troubles small businesses."
He says competition is the key. "If a company in New Jersey wanted to offer me a lower premium, I couldn't take it because companies can't write policies across state lines for small businesses. That kind of competition is the best way to get the cost down and help small businesses."
Henderson is also troubled by the cost of paperwork in the system.
"If we decide to accept a company's proposal, all the employees and I have to fill out new questionnaires. Then we have to send a check for the first month's premium with the application. It could take six to eight weeks to know if the application is accepted. You're out of two premiums, the one you paid to the new company, plus the one you pay to the company that's insuring you. Once it gets through underwriting, they can come back and say 'that's what we quoted and this is what we're going to charge you.' If you reject the proposal, the premium is refundable, but you're still out of that money for six to eight weeks."
On the other hand, Amy Blouin, executive director of the Missouri Budget Project , says the bill would bring relief to Missouri, where she says the number of uninsured has risen to about 734,000 people -- 1 in 8 -- while the number covered by employee-sponsored health insurance dipped to about 65 percent in 2008, down from nearly 73 percent in 2001.
Affordability is the primary stumbling block to employers buying insurance, according to a study by the Small Business Majority. In Missouri, 89 percent cited cost as the reason they offered no health insurance, while 72 percent of small business owners who did insure their workers said they were struggling to keep providing the insurance.
Rebecca Geraty is co-owner of St. Louis Composting , which has facilities in Valley Park and Illinois and employs 45 people. She wants legislation that clamps down on ever-rising annual increases that have been as high as 36 percent for her company.
"We will have healthier people," she says of the legislation, "but from a small business perspective, how are we going to stay in business while our premiums are driven higher?"
Arlene Zarembka, a lawyer in a solo practice, has one employee; she is also concerned with premium costs and coverage. She and her employee are in a group plan: Zarembka's premium costs $643 a month with a $2,500 deductible, and her employee's premium costs $428 a month with a $1,500 deductible. By contrast, she says a good friend in a large group plan pays $376 a month. In addition, Zarembka says her employee is paying $103 more a month than what a male pays for the same coverage.
She likes the House proposal because "as I understand it, this new law would prohibit sex discrimination. Being female would no longer be a pre-existing condition." She adds that she likes the insurance exchanges concept because "hopefully it will reduce our premiums, keep them down."
Her big concern, she says, is that the insurance exchange system won't go into effect until 2013. "That means all of us paying through the nose for premiums for the next three to four years," she says.
Anneta Vickers, the owner of T.A.B. Co. , was honored this year by the Small Business Administration. Located in north St. Louis, T.A.B. sells office, industrial and construction material and also specializes in video production. Vickers says that sales at her 11-year-old business are in the $2 million to $3 million range, but that the cost of health insurance remains prohibitive. To remain competitive, she says she must get by with a workforce of a half dozen part-time employees and independent contractors.
"The House bill opens up health care for small businesses" through options such as the exchanges, she says. "I'd like to offer everybody excellent benefits."
Some other companies like their current system of health savings accounts that help their workers cover their health coverage. That's the approach taken by Dynalabs, whose managing partners are Russell Odegard and Michael Pruett (left to right in photo). A major analytical laboratory located in midtown, Dynalabs employs 16 people and has sales of roughly $2.5 million.
The ongoing challenge, Pruett says, is finding affordable insurance. The company buys the insurance and the employees are encouraged to cover their deductibles through health savings accounts from pre-tax earnings. If the workers don't spend that money set aside yearly to satisfy deductibles, they are allowed to keep it.
THE FINAL OUTCOME
The House proposal "is a godsend" for small businesses, says Jerome Katz, the Coleman Foundation Professor of Entrepreneurship at Saint Louis University's Cook School of Business.
He says the legislation amounts to "a level playing field in a sense because all small businesses will have to provide health insurance, and they won't be able to duck. But this poses a problem for a subset of some small service and small manufacturing businesses that will be vulnerable. They already have been hit with higher costs, will face challenges and will be put out of business."
Of course, nobody can be sure what the Senate will do when it takes up the House measure. The two houses will have to negotiate a final bill to send to Obama, and it is bound to look different than
"Anytime the government comes up with a piece of major legislation, it has a price tag. But the vast majority of small businesses survive it and benefit from it."
In fact, he predicts, the final legislation, would give some small businesses "an excuse to increase their prices."