To the editor:
It's no surprise that small businesses on the North Shore are unhappy about their health care costs as the calendar year comes to an end. They have had a tough year.
On top of crawling out of an economic downturn, they pay higher health insurance premiums than mid- and large-sized companies, and their premiums are going up faster. And a recently signed state law will do little to help these companies that historically create two-thirds of all new jobs in the state.
The law gave local politicians running for re-election something to tout, but businesses in need of relief from soaring health insurance rates got undeveloped, delayed and short-sighted solutions.
While the law allows small businesses to pool together to purchase insurance for the first time, the cap on the number of individuals to be covered (85,000) is inadequate for the roughly 167,000 small businesses that need cost relief.
Past experience in states like California, Florida and Texas demonstrates that simply setting up a large pool is not sufficient to realize meaningful savings. Pooling must be accompanied by market-based reforms to ensure that membership in the small-business pool mirrors that of larger firms. Without these features, pooling will amount to another empty promise.
A potential 5 percent Connector subsidy for participation in "wellness programs" has yet to be defined or funded. The temporary subsidy doesn't take effect for roughly a year and does nothing to lower the cost of insurance after it expires. And from the small-business perspective, the prospect of another program designed and regulated by the state health care bureaucracy is less than appealing.
The new law requires a review every four years of mandated benefits. This would be meaningful if there were precedent for repealing unnecessary or costly mandates. However, obsolete mandates like bone marrow transplants for treatment of breast cancer have never been removed.
In fact, the Legislature has added additional mandates since passing health reform. While many citizens need services like prosthetic devices and autism services, the cost falls more heavily on small companies and their employees, since large companies are exempt from the mandates.
Finally, the executive branch has the authority to reject premium rate increases if they are deemed "excessive ... or unreasonable." This arbitrary standard for rejecting actuarially sound premium increases once again fails to address the underlying cost of care and lends itself to political theater.
Numerous nonprofit insurers have contractual agreements with providers. Forcing them to accept losses could impact long-term sustainability. The governor may be penny-wise today, but his move will be pound-foolish in the long run.
Price controls won't produce long-term savings. Reports from the RAND Corporation, among others, have found that artificially limiting the increase in premiums is likely to result in a deterioration of both the quality and availability of insurance products. It happened just this year when insurers boycotted the Connector's small-business program after the Patrick administration rejected proposed premium increases.
Reducing the cost and improving the quality of small-business health insurance plans will require Massachusetts officials to move from "terrible ideas" to ones that promote real market choice and competition. For example, allowing small companies flexibility with the design of the insurance products they can offer their employees, or enabling companies to compensate workers with a voucher to choose the health plan that is best for their family. These methods will control health insurance costs for both employees and employers, regardless of company size.
When health care reform was enacted, Massachusetts was considered a national leader. To maintain that leadership role, next legislative session the governor and the Connector board must remember that small business is the backbone of the state's economy and a crucial gauge of health care reform's sustainability.
Joshua D. Archambault
Program manager, Health Care
Pioneer Institute
Boston
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