SBAM survey small firms hope court overturns PPACA


    As the nation awaits the U.S. Supreme Court’s decision this month on the constitutionality of the Patient Protection and Affordable Care Act, an e-mail survey of small business owners by the Small Business Association of Michigan finds widespread skepticism about the value of the act to entrepreneurs and their employees:

    • Seventy-six percent say Congress and the president overstepped their authority in passing the PPACA, and 77 percent think the Supreme Court should rule it unconstitutional.
    • Seventy-seven percent of respondents say they do not qualify for a tax credit that was touted as a key benefit for small businesses. Fourteen percent were not aware of the credit. Only 6 percent say their company took advantage of the credit.
    • Seventy-two percent say employers should not be required to offer employee health plans.

    The PPACA requires that companies with 50 or more full-time equivalent employees must offer “affordable” insurance coverage by 2014 or potentially be subject to a “free rider” penalty.

    SBAM health insurance expert Scott Lyon said the key elements in question are:

    • The Individual Mandate and its related provisions, including the requirement for individuals to maintain a minimum level of health insurance coverage, the design of insurance exchanges, insurance market reforms (guarantee issue and renew, pre-existing conditions can’t be excluded, covering children on their parents’ health insurance until the age of 26, etc.)
    • The Expansion of Medicaid, essentially who is eligible for Medicaid and how is it funded.

    Lyon said the opinion of most people who follow the Supreme Court is that a decision on PPACA will come at the very end of the current session. Supreme Court decisions are issued on Mondays and Thursdays, he said. The last Monday and Thursday in this session are June 25 and 28.

    “Regardless of what they do, there is going to be a media and political firestorm,” said Lyon, so he suspects the decision will come at the very end of this Supreme Court session, and then the justices will “skedaddle out of town for the summer.”

    The latest SBAM survey “clearly shows that small employers are skeptical about the merits and value of the Affordable Care Act,” said Lyon. “But it’s important to note that regardless of how the court rules, Michigan and, for that matter, the rest of the country, still will have a health insurance cost problem. The cost of U.S. health care services is expected to rise 7.5 percent in 2013, more than three times the projected rates for U.S. inflation and economic growth.”

    Lyon said those figures are from an industry research report released in late May by PricewaterhouseCoopers.

    According to the PricewaterhouseCoopers, premiums for large employer health plans could increase by only 5.5 percent as a result of company wellness programs and a growing trend toward plans that impose higher insurance costs on workers. The projected growth rate of 7.5 percent for overall health care costs is in contrast to expected growth of 2.4 percent in U.S. gross domestic product and a 2 percent rise in consumer prices during 2013, according to the latest Reuters economic survey.

    Lyon said one of the reasons health insurance costs so much is due to Medicare and Medicaid, which do not pay providers enough. A couple of years ago, the actuarial firm Milliman estimated that for a family of four, there is a cost shift of $1,788 (15 percent of their premium). In other words, the family is charged more for insurance to make up what Medicare and Medicaid don’t cover adequately. Ending this cost shift would help small businesses and their employees afford coverage, according to Lyon.

    Paying providers at a “fair or fairer rate,” he added, may sound easy enough, but “the big question that needs to be resolved is, of course, where does that money come from?”

    Lyon said a second reason health insurance costs as much as it does is due to the cost shift from the uninsured to the insured, which is estimated at an additional $922 for a family of four.

    “No one on either side of the political aisle denies the uninsured and the cost shift; this is the problem that the Democrats and the Affordable Care Act are trying to resolve with the individual mandate and employer ‘play or pay provision,’” he said.

    He noted that before PPACA began taking effect, of the 47 million uninsured: 4.7 million were college students, 10 million were non-citizens, 11 million were eligible for but not enrolled in public programs like CHIP and Medicaid, and another 9 million lived in a household with annual income of more than $75,000 (meaning they could afford insurance if they wanted it).

    The remaining 12 million uninsured earn what is generally considered to be too much to qualify for a public program but not enough to afford insurance coverage, said Lyon, adding that it is for these people that a solution needs to be found.

    “Solve the two cost shift problems of Medicaid and the uninsured, and we could save an average family of four nearly 25 percent of their premiums,” said Lyon.

    SBAM offers several suggestions for getting the cost of health insurance under control:

    • Common electronic standards/interoperability, electronic medical records and common claim forms for providers regardless of what insurance company or federal program is providing the insurance.
    • Providing comparative data on health costs, success rates, infection, morbidity and mortality rates inside facilities.
    • E-prescribing/computer physician order entry.
    • Reducing waste fraud and abuse — and getting at it electronically.
    • Promoting best practices and/or centers of excellence for health care services and greatly reducing the rate of infection within hospitals.
    • Pay for performance — offering bonuses, or withholding payment when care is sub-par.

    “Lastly, people need to take much better care of themselves, and prevention and wellness incentives need to be included for small businesses and individuals,” said Lyon. “In many ways, we are our own worst enemies. Obesity, tobacco use, the lack of exercise, etc., all add to the cost of care.”

    Lyon said there is “no one magic bullet that’s going to get costs in line,” but he added that a use of several strategies simultaneously will “start making progress.”

    “Everyone wants to point at the other guy,” he said. “The reality is that the providers, the insurance carriers, business, individuals, pharmaceutical companies, the hospitals — everybody owns a piece of the problem we have with health care. I think those eight or so (suggestions from SBAM) really sort of get at all of those, at least on the margins.”

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