“I am quite worried about health insurance reform,” the small business owner told me. “Can you tell me how all of this is going to affect me?” She went on to explain, “I do buy insurance for my employees, but it is very expensive and I am not sure I can continue.”
High costs hit small employers hard. They are left with few options. Pay more or drop coverage for employees. It is little surprise that half of those uninsured in the U.S. own or work for a small business or are self employed. If they do have insurance, workers in small businesses pay higher deductibles, have fewer choices and poorer coverage.
Many businesses are looking at sharp rate increases this spring. Concerned business owners have contacted me looking for ways to reduce health insurance costs. They are not sure changes at the federal level will provide much help.
Much of federal health care reform is phased in over several years. Beginning in tax year 2010, small businesses offering coverage for employees will receive a tax credit of up to 35% of premiums. This will help when the tax man comes to collect but it won’t provide relief for business owners struggling under high premiums right now.
One of the hallmarks of health care reform is the creation of state-wide ‘exchanges’ for small business. These exchanges provide a ‘one stop shop’ for employers and their employees to choose a health insurance plan right for them. Plans are vetted on cost and quality by the exchange before they are offered. Employers are presented with an array of plans to meet their needs. Benefits are standardized so comparison shopping is easy.
But federal health care reform does not require states to create small business exchanges until 2014.
I drafted and introduced a proposal to create an exchange for small business. My bill, called the Small Business Health Options Program (SHOP), allows Wisconsin an opportunity to control health care costs by creating a state-wide exchange three years prior to the federally required implementation date.
Wisconsin has experience operating an exchange. The state employees choose health insurance plans through an exchange. Wisconsin’s experience with the state employee’s health plan demonstrates how to control costs while expanding choice.
Costs are controlled because employees choose plans that provide high quality care and are low cost. Competition among plans is based on cost and quality. At its core, the exchange shifts market incentives from competition based on avoiding risk to competition based on cost and quality.
Why wait until 2014 to create an exchange for Wisconsin small business owners? We’ve got the tools and the knowledge to get started. In addition, federal funds are available, beginning next year, to assist states.
Senate Bill 707, the Small Business Health Options Program, requires insurers who sell insurance to Wisconsin small businesses (defined as not more than 50 employees) to sell insurance through the exchange. Brokers assist companies in navigating choices available and insurers receive marketing assistance, enrollment and collection of the first month’s premium.
Faced with no good choices, many small business owners are dropping coverage to their employees. At the same time, business owners are concerned changes from Washington will cost them even more.
I am hopeful by putting out a proposal to address rising costs, people will have an opportunity to look at the details, evaluate how the plan might benefit them and suggest changes. We can develop a uniquely Wisconsin solution to rising health costs for small business and do it soon.
You can view Senator Vinehout’s Small Business Health Options Proposal at http://www.legis.state.wi.us/2009/data/SB707hst.html or contact her at sen.vinehout@legis.wisconsin.gov for further details.