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Broker Argues That Capping Insurance Premiums Won't Work

Bill Randell is the president of Advantage Benefits, a Worcester-based insurance brokerage agency that works for major insurers to sell plans to employers. He says many of the current proposals to lower costs for small businesses won't work, and suggests a few alternatives:

The rejection of the current health insurance increases will do nothing to help relieve the burden on small businesses. In fact the insurance companies will most likely win their lawsuit filed yesterday to have this capping of rates disallowed. Rather than add a new plan, insurance exchange or rejecting proposed rates, we need to come up with real changes that will control the cost of health insurance. Here are a few.

First, we must end the "open enrollment" loop hole. Because of the Massachusetts Health Care Reform Law of 2006, small groups (1-50) and individuals can now obtain health insurance, regardless of pre-existing conditions, receive treatment the next day and then cancel coverage the day after that. Unlike all group sponsored health plans, which have a limited annual open-enrollment period, the 2006 law allows for health insurance on-demand. In theory, it’s a good idea, in practice; it’s a huge cost driver because people are “gaming” the system as was spelled perfectly in The Boston Globe this past Sunday.

Like Medicare or any private or public employer, we must limit the "open enrollment" period for health insurance for individuals and small groups to one month each year. Otherwise, they must be fully underwritten. Imagine the effect on premiums, if we were to force insurance companies to insure houses that were already on fire or cars after they were in accidents. This is no different.

Second, the current penalty for not having health insurance is too low. An annual penalty of up to $1,116 may sound steep, but it doesn’t compare to the actual annual cost to maintain health insurance.

As a result, some people just pay the penalty because it is cheaper and they know they can buy health insurance when they need it, because of the year-round open enrollment. By ending the continuous open-enrollment, and boosting the penalty, we’ll move more people into the insurance system, thereby spreading out costs even more.

Third, we need more flexibility in plan design. To avoid paying the non-coverage penalty, people must buy a plan that includes prescription coverage to meets the state’s Minimum Credible Coverage (MCC). Making prescription coverage optional, like Medicare, would give small businesses a lower cost option, which is estimated to be 10% of the annual premium. Have a look at the list of prescriptions pharmacies, like Walmart sell at $4 for a 30 day supply or $10 for a 90 day supply, that you can buy without needing health insurance.

Furthermore, Massachusetts imposes many costly mandates for coverage, such as in-vitro fertilization. Many large employers are able to avoid these costly mandates because they self-insure for health coverage. We should give smaller employers the same ability as large self-insured businesses and offer an MCC plan that does not include state mandates.

Finally, the Connector Authority should add an asset test like Medicaid. Currently a multi-millionaire can qualify for coverage as long as their earned income is below the income guidelines (300% of the Federal poverty level). In addition the Connector Authority should have an outside audit performed to make sure current subscribers have not been offered health insurance from their current employer with the last six months, which disqualifies them from being eligible for this subsidized plan.

The goal of healthcare reform in Massachusetts is to get everyone covered, so instead of an uninsured person waiting until a condition spirals out of control, they would have access to treatment earlier, thereby improving their health and lowering costs. So far, the state has removed a lot of people from the uninsured rolls, but the system still has too many loopholes and is not controlling costs. Let’s implement reform, like those listed above, which will actually help contain costs and provide real relief to businesses.

This program aired on April 6, 2010. The audio for this program is not available.

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