Controlling the High Cost of Health Insurance

by Harold Wallace

Locally, small businesses can obtain health insurance, but it can be very expensive. Insurance companies charge smaller firms higher premiums because risk cannot be spread among a large enough pool of employees. One option is to purchase group plans directly from the insurance company.

Escalating health insurance costs are a major factor contributing to the current slow pace of business recovery. Premium costs increased by 59 percent since 2001 and are seen underlying the slow pace of hiring for businesses large and small. This situation poses particular challenges for small businesses. The Kaiser Family Foundation reports that in 2002, 53 percent of small firms cited health insurance benefits "the great-est cost concern for their company." A National Federation of Independent Businesses (NFIB) survey finds health insurance costs a "critical problem" for two-thirds of small businesses. According to NFIB, there are nearly 25 million small-business owners, employees, and families without health insurance, there-by representing almost 60 percent of American's 45 million uninsured.

Kansas City has 135,300 small businesses with fewer than 500 employees that generate more than $160 billion in revenue and employ more than 773,800 area residents. As a major economic sector, creative strategies are required of small business owners to meet this challenge.

Locally, small businesses can obtain health insurance, but it can be very expensive. Insurance companies charge smaller firms higher premiums because risk cannot be spread among a large enough pool of employees. One option is to purchase group plans directly from the insurance company. Quotes may be obtained by calling an insurance carrier, an insurance broker or via the Internet. I suggest starting with a direct quote; it serves as a good benchmark for analyzing other purchasing options. If group insurance is just too costly, there are alternatives. Purchasing pools and community health centers offer other viable possibilities. Through purchasing pools, small businesses obtain health insurance as part of a larger group at lower rates. Associations such as Chambers of Commerce provide an attractive purchasing pool. The Greater Kansas City Chamber of Commerce offers Chamber Choice, a plan sponsored by Blue Cross Blue Shield of Kansas City. The comprehensive plan package includes hospital, dental, life insurance, and guarantees no rate increase in the second year of participation. With 5,500 members, Chamber Choice offers participation in a large risk pool so rates are lower, an important consideration in finding affordable health benefits.

Community health centers, called Federally Qualified Health Centers (FQHC), provide affordable health care to underserved and uninsured patients. FQHCs receive various financial incentives from the federal government in return for providing quality health services to all without regard to income or insurance status. A sliding fee scale is available to self-pay patients with charges based on income and family size. Samuel U. Rodgers Health Center and Swope Enterprises, the only FQHCs in the Kansas City area, both offer affordable, quality healthcare that is accessible to self-pay small business owners and employees.

The National Federation of Independent Business (NFIB) advocates Association Health Plans (AHP) legislation that function very similar to purchasing pools, but would function on a national level to gain volume and clout. AHPs are predicted to extend greater bargaining power, economies of scale, administrative efficiencies, and a uniform regulatory structure under the federal law to the small business community.

AHP legislation calls for tough consumer protection provisions to ensure patients rights and payment of benefits. Only bona fide associations in existence for at least three years for purposes other than providing health coverage can operate an AHP. AHPs would be required to offer all options to all association members as well as comply with the Health Insurance Portability and Accountability Act (HIPAA), which prohibits the exclusion of high-risk individuals with high claims experience from group health plans. Although the AHP concept seems to be attractive in some respects, it has yet to receive Senate confirmation.

Yes, controlling health insurance cost for today's small businesses is an immense challenge, but there is one choice within everyone's reach to lower health care costs: exercising healthy choices, following core nutritional guidelines, annual medical check-ups, and daily exercise does the body good while saving more than a few pennies!

Harold Wallace is the CEO of Samuel U. Rodgers Health Clinic. He can be reached at 816.889.4612 or at hwallace@samuel-rodgers.org