'A Plea For A "GIC" For Small Businesses and Non-Profits' by Jon B. Hurst

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Regular readers of the WBUR Commonhealth blog know that I have complained long and loud for years now that the clear shortcoming of health care reform in Massachusetts has been the lack of equal rights, opportunities, and insurance pricing under the law and in competitive markets for small employers versus what exists for the big business and big government. We remarkably have a health care mandate law pushed for by the receivers of our health care dollars—such as Blue Cross/Blue Shield of Massachusetts and Partners--which requires coverage, yet which does not allow small businesses and small non-profits the same ability to group buy or to seek discounts from providers that large purchasers enjoy. Without that ability, insurers are free to take money from the small purchasers in order to give all the discounts to their big groups. Kay Lazar of the Boston Globe examined this issue very recently.

We all know about the hundreds of millions of dollars cities and towns would save by joining in on the buying clout of the Group Insurance Commission. The GIC has been very effective in keeping their recent increases in the 3-5% range.

Yet for some reason, policy makers and insurers have not acknowledged the need for a similar organization or mechanism for small purchasers to keep the marketplace fair and to prevent cross-subsidies. The common response you hear on that point is that: “Well, we do that through the local chambers of commerce.” Wrong! Yes you can buy through your chamber, or through similar organizations, but it is simply a buying service to show you what your options are with a variety of insurers and plans. There is no discount; there is no negotiation.

And then there is the response: “Oh, but that is what the Connector is for.” Wrong again! The Connector can and has been effective in getting discounts—even no increases—in the state subsidized plans, but has no authority to do that for the non-subsidized plans. In fact they must use the very same rates the insurers file with the Division of Insurance, when they do take the step to go beyond their current pilot program.

So why then haven’t we passed legislation to allow small businesses and small non-profits the ability to stop the double digit increases they have been facing year after year? Well, let’s examine the arguments our organization and other groups representing small employers—both for profit, and non-profit—have heard repeatedly over the last 8 years or so. The most recent legislation by Representative Steve Walsh has been amended to address each and every one of the opponents (insurers) red herring arguments.

We have already tried that and it didn’t work.” Well let’s see; the Legislature under pressure from the big insurers prohibited that ability in 1996. Back then there were only very small buying groups, and health insurance for small businesses and their employers was a mere fraction of what it is today. It is likely no coincidence that small group rates have gone up double digit nearly every year since the repeal of the law, and the door has been swung way open to take premium dollars out of the pockets of small businesses in order to give the insurers the ability to give big discounts to big purchasers. That’s called cost shifting. The current legislation has been modified to create only one large buying group for small purchasers under an umbrella overseen by the non-profits representing those employers—essentially a small business GIC, at no cost to the taxpayer.

But you will not follow all the state mandates.” Wrong. Unlike the options to avoid state mandates under federal law (ERISA) currently enjoyed by big business, the legislation specifically requires all mandates to be covered. It also requires regulations to be written and oversight to be done by the state Division of Insurance.

But you will ’cherry-pick’ and only take the ‘best’ risks, leaving all the bad risks to see increases.” Obviously that statement ignores the very fact that members of trade associations, professional societies, chambers of commerce, and non-profits organizations represent a true cross section of society on health care price factors such as age and health status. With that diversity and the fact that such organizations are not in the habit of discriminating against their members, this argument is nonsense. But just to further address this red herring point and to take the argument off the table, the new bill clearly prohibits “cherry-picking.”

We are very concerned about small employers and recognize the need to help them.” Then give them relief and equal rights. We need either more competition or more regulation in the small group marketplace. Right now we have very little of both, and such a situation means only one thing: the consumers (i.e. small businesses and their employees) are getting ripped off. Why should any small employer implement any of your late to the game wellness programs, when the savings created by having a healthier workforce simply stays in the insurers’ pockets, or is used to give even greater discounts to big purchasers instead of actually reducing small businesses’ premiums?

And then there is the one: “But ‘so and so big business organization’ opposes your bill!” Any organization truly concerned about small employers—both for profit and non-profit—and which represents exclusively the “payers” of health care costs rather than “receivers” of our health care premiums, supports this concept of marketplace fairness.

It’s time for the big insurers to face the music. A rotten economy, an insufficient competitive marketplace, continued double digit small group premium increases, recent outrageous increases in broker commissions, and a faulty and discriminatory law all mean it is time to decide which route we are going to take to save our small employers. Either we must give them the tools to create their own savings and new competition, or the state regulators must finally get off the sidelines and clamp down on small group insurance rates to ensure that they are no higher than the average large group rate. Which will it be?

Jon B. Hurst
Retailers Association of Massachusetts

This program aired on June 8, 2009. The audio for this program is not available.

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Martha Bebinger covers health care and other general assignments for WBUR.