By Dick Goff
It’s safe to say that January 2009 is absurdly different than anyone would have predicted in January 2008. The combination of new political leadership against the background of a foundering economy leaves us in a strange and alien public policy environment.
Of course everyone has a different attachment point for political concerns. Those of us involved in self-insurance and alternative risk transfer feel the first tremors of an earthquake that could leave our landscape unrecognizable. The most obvious example is health care, where political proposals are trending toward some form of nationalization.
For members of the Self-Insurance Institute of America, Inc. (SIIA), thousands of employers that sponsor employee health benefit plans and many millions of members of those plans, change must not come abruptly or without concern for their needs. At present 160 million Americans are covered by employer-sponsored health plans. The security of their coverage must, we believe, be a paramount consideration.
This is so important to get right that we are going to show some restraint in our responses to the forces of change. We will constructively engage with them to make sure the interests of members of employer-sponsored self-insured health plans are served. For us, this means more educational efforts and collaboration rather than combat. However, if the administration and/or members on Congress seek to dismantle the employment-based health care system, combat will be required.
Given SIIA’s strong reputation on Capitol Hill, we expect to have the opportunity to be part of the discussion and provide technical support in order to refine any legislative proposal that could indirectly lead to the erosion of employment-based health coverage for those 160 million Americans who now count on it.
SIIA has a long history of contributing to the national health care debate. Our most recent contribution was the release in 2008 of our Blueprint for Sensible Health Care Reform that is the backbone of our effort to extend coverage to uninsured people while preserving the employer-based system.
The Blueprint, available online at www.siia.org, offers four methods to broaden coverage among uninsured persons: cost containment, reliance on the employer-based health care system, small business pooling arrangements and tax incentives. These are summarized as follows:
Cost containment. Controlling health care costs would stimulate many additional employers to provide health plans and reduce the number of uninsured persons. America currently spends more on health care than any other country in the world. We believe this is because of inefficiencies, lack of competition, over-use or inappropriate use of services and the lack of modern information technology. SIIA’s specific recommendations are:
- Price transparency. Health care is the only product that denies consumers the ability to shop by comparing costs, optional treatments and quality.
- Health care price data should be compiled by the Department of Health and Human Services. Regional list prices (consistent prices for all customers) and quality assessments would enable consumers to knowledgeably select providers for specific health treatments.
- Creation of lifetime personal electronic medical records controlled by consumers.
- Tax credits and financial grants to help providers and payers develop health IT systems and other components for fully-wired health care practice and insurance administration.
Rely on the employer-based system. Employer health plans have found great efficiency through the federal preemption provided by the ERISA law which allows an employer with a multistate workforce to maintain a consistent program across state lines with all of the cost savings and administrative efficiencies of central management. Erosion of ERISA would lead to a patchwork of state regulations which would burden plans with severe administrative expenses and costs of varying mandatory treatments. Weakening ERISA would actually have the reverse effect on the number of uninsured as many employers would reduce or curtail their health plans.
Small business pooling arrangements. A full 60 percent of the working uninsured work for, or depend on, small employers who lack the financial ability to provide health coverage. The Congressional Budget Office estimates that multistate small business pooling arrangements would save the typical small business owner between 15 and 30 percent of the cost of employee health insurance.
Legislative solutions are needed that permit small businesses to work together and take advantage of economies of scale to obtain affordable health coverage for their employees with regulation by the Department of Labor which now oversees ERISA plans. (If this article is distributed work in Dick’s comments: With the caveat that the private sector designs, implements and manages the pooling arrangements, not the government.)
Tax incentives. Smaller employers should be added to the number of mid- and large-sized employers that now benefit from tax incentives to provide employee health coverage. Small employers and self-employers are now excluded from such tax code advantages.
The current tax code treats big business’ employee health costs as a deductible business expense but, for certain small businesses, health care costs are treated as merely another form of taxable compensation. Tax incentives to these groups that result in new health care coverage will significantly decrease the number of uninsured Americans. Incentives can also help increase the use of less traditional techniques in the fields of preventive care and wellness, which can help lead to lower long-term health care costs.
Consumer-driven health care (CDHC) is an expanding form that is also incentified by the tax code. Under current IRS regulations medical savings accounts such as health savings accounts (HSA) and flexible savings accounts (FSA) are restricted and cannot be implemented by companies to their greatest benefit.
SIIA believes that individuals participating in an HSAs should be able to deduct the premiums for the high-deductible health insurance policies from their taxable income. Also, the tax code should increase contribution limits to HSAs (with attention to early retirees aged 55-64) and allow them to incorporate flexible spending and health reimbursement arrangements.
Finally, the tax code should eliminate the “use it or lose it” rule which states that the money in FSAs must be spent within the “plan year” or be forfeited back to the company.
Dick Goff is CEO of The Taft Companies, a captive insurance management firm and Bermuda broker, and serves on the SIIA board of directors and as chairman of the American Risk Retention Coalition. He may be reached at dick@taftcos.com or 877-587-1763.