There are a number of ways to fix what’s wrong with the U.S. healthcare system without throwing out what’s right with it. Small businesses often don’t have much choice in healthcare, and choice (i.e., competition) can fix that without raising taxes and putting small businesses out of business.
When the Senate passed its 2000-plus-page version of the Healthcare Reform bill, the one thing that struck fear in the hearts of many small businesses such as molders and moldmakers was the elimination of Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs), in favor of a “public option”—a government-run system that all the latest polls show is not favored by the majority of Americans.
This past September, the American Mold Builders Assn. went to Washington, DC for its annual fall conference to meet with senators and representatives from as many states as possible to let them know the AMBA’s concerns. In the group this reporter was assigned to, one member, Pat Dolan, CFO of GH Tool & Mold Inc. (Washington, MO), was quick to point out to each Congressperson we met with the huge advantages of HSAs and FSAs in small businesses. He implored them not to vote for anything that would destroy HSAs and FSAs. Obviously, his pleas fell on deaf ears.
“Any of the legislation that Congress is currently considering will harm our business,” says an angry Dolan. “The solutions we have at G.H. Tool incorporate a number of different things that make our healthcare insurance program work for our 100 employees and their families, including FSAs and HSAs, which are a key part of our program. The benefits we provide our employees are a key building block of our company’s ability to be profitable, competitive, and successful, and if Congress takes this away it would really hurt us as a company.”
Dolan, like many small-business owners, believes that one of the primary steps that can reduce the costs of health insurance is to allow trade associations to negotiate group rates for their membership across state lines. Currently, they are prohibited from doing this. Dolan brings up the National Federation of Independent Businesses as an example. “Many NIFB members are too small to have any negotiating leverage, and if they have one or two chronic illnesses to cover, they could easily be priced out of the insurance market, leaving them and their employees uninsured,” says Dolan. However, the NFIB, with its 40,000 member companies, could negotiate very competitive rates for the entire group. This approach to solving the problem could easily increase the number of insured Americans by millions without the government, or taxpayers, incurring any expense.”
In the AMBA’s periodic surveys of member benefits, members report concern about the affordability of healthcare benefits for their employees. They are aware, however, that the AMBA cannot provide a program for its members. According to executive director Melissa Millhuff, navigating the complex waters of individual states’ insurance rules to accommodate every AMBA member is a huge task. “Obviously our members would like this benefit because it would reduce their healthcare costs to their employees, but the system is so complex, the AMBA can’t provide those benefits,” says Millhuff. “We’ve discussed this with Gibson Insurance, the company that provides business insurance for our members. But it is nearly impossible to coordinate a plan on a state-by-state basis, and we can’t find an insurer that will do this for us.”
Competition is limited in most states because not all insurance companies can sell in every state. According to Goldman Sachs, in 2006—the most recent data available—only 14 of the 50 states have good competition when it comes to selling health insurance. Twelve states have the least competition; the rest fall somewhere in between.
In an effort to devise programs that hold the line on costs for both the company and the employees, many moldmaking companies have developed various plans that include FSAs, HSAs, self-insured plans, or a hybrid. And for many, it’s working.
New choices get accepted
The changes at G.H. Tool & Mold Inc. have evolved over the past six years. “We went from offering our employees a traditional low-deductible plan, with its hefty premiums and employee contributions, to offering our employees multiple choices including a high-deductible Consumer Driven Health Plan (CDHP) option with much lower premiums and no employee contributions,” Dolan explains. “Employees were skeptical and concerned when the changes began, but today over 90% of our employees have voluntarily accepted one of our CDHP options.”
The premium savings were substantial for both G.H. Tool and its employees, allowing the company to use the savings from the lower insurance premiums to eliminate employee premium contributions and to begin making matching contributions to employee HSAs. The company also doubled employee life insurance coverage, established a free vision insurance program, and provided employees with the free long-term disability insurance coverage.
In addition to the expensive low-deductible option and the high-deductible CDHP, the company offers a third option that fits between the two, acting as a cushion to employees having more serious or expensive health issues. Currently G.H. Tool has 100 educated healthcare consumers who are working together with the owners to keep healthcare costs under control.
Steve Rotman, president of Ameritech Die & Mold Inc. (Mooresville, NC), began checking his options after he was notified of a 23% increase in his premiums for his 33-employee company, which includes a plant in Ormond Beach, FL. The new quote didn’t include three 18-year-old apprentices that Rotman had hired, and an older employee that had quit. He asked for a re-quote based on the new information he provided, and the new rate came back at 13% higher than the previous year’s. Even with higher deductibles (an additional $1000 for families and $500 for individuals), there was still a 4% increase, so Rotman developed a hybrid system to help reduce his costs and improve employees’ insurance.
“Our HSA for the last two years was a $5000 deductible for a family and $2500 for an individual,” explains Rotman. “For 2010, I raised the deductible to $6000 for a family and $3000 for individuals. We self-insure the additional amount but only if needed. We also contribute into the respective employee’s HSA—$1100 for individuals or $2200 for families, whether or not the employee puts anything in the account, or actually files a claim.”
Scott Phipps, president of United Tool & Mold Inc. in Easley, SC, has a similar hybrid program for his 48 employees, and “it’s the best thing we ever did,” he comments. “I’d be really upset if [the government] took this away from us.”
United’s program has a high deductible. The employee puts in $2500 and the company matches that in an HSA plan. “In a high-deductible program, everything you spend on healthcare that would be covered under the specific coverages of that plan go towards the deductible. But the employee can also use the account to pay for something as simple as aspirin, or other simple health-related costs, and it is pre-tax,” Phipps explains. “We’re partially self-insured. The biggest advantage to a program like this is that in the end you take away the ability of the insurance companies to get out of paying for your healthcare.”
Rotman agrees. “They get complete and total control of their healthcare expenses, as well as the opportunity to fund dental or optical expenses,” he says of his plan. “They also can sock away additional tax-deferred payments each month for future health needs such as surgeries or births. They can plan their healthcare needs within a certain time frame to maximize their use of the deductible.”
The advantages for an employer, says Rotman, are lower costs and many more options for healthcare needs for his employees. “The idea of teaching our employees to manage their own healthcare costs, as well as plan better for future needs, has huge advantages for them,” he adds.
Like many small-business owners, Rotman has doubts about the healthcare reform Congress is trying to cobble together from the House and Senate versions. “I think HSAs are the best solutions for the current system of health care,” he states. “I find it hard to believe that [Congress] will remedy every bad issue out of the current healthcare structure, and not create worse care for the employees. The general public needs to be more healthcare savvy, and the HSA model helps that education. I for one hope that HSAs are not eliminated.”
Dolan also questions the government’s intent with reform. “If the government’s true motives were to increase the number of people with medical insurance and reduce health care costs, they would allow trade associations to negotiate lower insurance premiums on behalf of their membership, encourage the use of CDHPs, and continue allowing HSAs and FSAs to supplement the CDHP plans,” he states.
Dolan, Rotman, and many other small-business people also have the backing of The National Assn. of Manufacturers (NAM), which recently issued a statement expressing its disappointment in the Senate version of the healthcare bill that was passed just before the holiday break. “We are truly dismayed to see healthcare legislation advancing in the Senate that does nothing to contain costs for America’s manufacturers and job creators. This bill raises costs for manufacturers at a time they can’t afford it,” stated NAM president John Engler. “Reform should be about reducing costs, improving access, and preserving what is working in the current system—not limiting manufacturers’ ability to provide generous health care benefits.” —Clare Goldsberry