A little-noticed Congressional health reform hearing on February 4th offers some hope that small business groups are ready to move further to meet health reform advocates than perhaps they did during health care reform in the 1990s, when the proposals for major change devolved into a rash of cumbersome and ineffective small group insurance reforms in dozens of states.

Here's what Janette Davis, a small business owner in Florida, had to say last week on behalf of the U.S. Women's Chamber of Commerce:

It's time to end the stranglehold health insurance companies have on American citizens. Small business owners and their employees have been forced into paying exorbitantly high premiums, risking high deductibles, and then nickel and dimed by insurance companies. We need to wrestle the control of our health care out of their hands and put it back in the hands of individuals and doctors. Get rid of endless administrative overhead which is often aimed at finding ways to not pay for care. Help American small businesses pool together to leverage our scale and bring the costs of care down.

One key proposal for grouping not just small businesses, but self-employed people and individuals, is the public plan option we've discussed on this blog before. A public plan would spread the risk across all the people who joined, and it would have vastly reduced administrative overhead so more of our dollars would directly pay for the health care we need.

But you already know that we support a public plan option. More interestingly, so do many members of the National Association for the Self-Employed. "Micro-business owners are evenly split in their opinion on whether a government-run health option is the right approach," he told the committee. He didn't go much further than that, but that means millions of self-employed people are just as fed up with the insurance industry as Janette, even after states have spent years trying to improve access and reduce costs to small employers.

A new small employer coalition, called the Main Street Alliance, recently published a national survey of small business owners. According to the Alliance, in an op-ed published here:

Small business owners are tired of being held hostage by private insurance companies that treat them like a captive audience, jacking up rates every year and refusing to cover claims at their own whim. Small business owners recognize that the only way to stop this routine hostage-taking is to create a public alternative that gives those who are tired of the industry's game another option. That means government is going to need to step in and play a role.

In the 1990's, with small businesses crying foul over ever increasing insurance rates, harsh underwriting standards for their employees, and shrinking coverage, states began to address the issue with "small group" reform bills. Unfortunately, most of that state level reform didn't do very much according to studies conducted years later.

Although small group reform has spurred some firms to offer insurance that otherwise would not have, the majority of uninsured firms have not responded. These firms say that the high price of coverage is still the major barrier they face to offering a plan. Small group reform has had not effect on the price a small business pays for health insurance. Whether considered individually or as a group, the different small group reform measures have had no effect on premiums.

State reforms included efforts to create "purchasing pools"--a similar concept to the idea that Blue Cross Blue Shield brought to the committee (now recycled as "state insurance marts" or SIMS). And most states created "high risk" pools designed to accept people with pre-existing conditions--but at a high cost.

Some states required "community rating," insurance lingo for combining healthy and sick people together to get a more stable and predictable group for purposes of deciding what price to charge. Other states (like mine) issued complicated rating rules dubbed "modified community rating" designed to allow insurance companies a bit more room to maneuver in the prices they offered different employers based on age, sex and other factors related to their employees. In the end, the studies now show, none of these systems did very much. They didn't get very many small employers to cover their employees, a primary goal of most reform, nor did they reduce prices or improve coverage over the long term.

The states are sometimes a great way to incrementally test reform ideas. If it works in one or more states, maybe it's ready for the national stage. The passage of modest insurance reforms aimed at trying to improve the market for small business was a state experiment that failed, and we can learn from that too. It's long past time to give small employers the real break they need so they can help us put this economy back on track.

comments (5)

As a self employed contractor I have been on my own for years
when it came to buying my health insurance. My last policy was an
affordable(?) one and cost me over $400.00 per month. That left me with a $5,000.00 annual deductable. I had knee replacement
surgery in 2008 and after my "insurance" paid what they wanted to,
I was left with medical bills of over $34,000. That combined with the HUGE down turn in the economy and my income disappearing,I'm broke at retirement age! I'm sick to death of being ripped off by the insurance industry. Citizens must DEMAND affordable REAL health care coverage. Banks and insurance companies and the medical profession have reaped far too much out of our society's pockets. The greed must stop.

Since when has any government run program prooven to be more efficient than a privately run program of the same nature? There are now a number of groups offering insurance to small business but you have to join the group which many do not choose to do. You can't pool risks if nobody will jump in the pool.
But the real problem is not the cost of insurance it is the cost of health care the insurance is expected to pay. Health care costs have outpaced inflation for a number of years and they are reflected in insurance premiums.
Today's attitude is that health care should be paid in full by insurance. Therefore the real emphasis needs to be on controlling how much health care is required and the cost of obtaining the required care.

I am among the "lucky few" who have lost 40% or more in the stock market but have sufficient other assets to survive. My concern is not my own survival but the possibly irrepairable harm done to relatives, friends, service providers, & small businesses - in other words "little people."
One example of the harm banks have done may not be as media-worthy as investment swindles or near loan-shark credit card interest, but may be more typical of the harm to "little" people.
I live in a friendly community - Skokie, IL - where contact between police, firemen, store owners, mailmen, and other service providers is up close and personal. This is an example of the harm done in my community to my auto mechanic, who fairly serviced my vehicles for more than a decade.
His WAS a two-bay "mom and pop" auto repair shop. He profited by about $75,000 each year as owner and his working partner earned about $50,000, while employing two or three mechanics, paying taxes, and providing dependable service at reasonable cost.
Not too long ago but well before our economic debacle, his lease was not renewed so a bank could build a drive-in facility and some coomercial store fronts on what was a prime location. He arranged to lease a facility at another location, not as prime and at a far higher cost. This was to be an interim solution to his relocation problem.
When his short-term lease was to be renewed, a bank raised his lease costs. He decided to buy rather than lease, and bought a suitable building. encumbering his house with a mortgage and his business with a remodeling loan. He had until that time been relatively debt-free with an excellent credit rating.
He had to remain closed during remodeling. The loss of income was tolerable until remodeling took longer than expected, existing boiler, air conditioning, etc. had unexpectedly to be replaced at additional costs.
The outcome after the debacle: (1)a second drive-in bank & commercial space was constructed next to the one that displaced his automotive repair shop, both are under utilized and have unrented commercial space and (2) a third bank was constructed & opened only blocks away!
With regard to small business in the area - a hot dog stand that had been established in 1976, a gas station, a "mom & pop" bakery, small grocer, shoe store, chinese take-out, and tailor have all gone out-of-business. I do NOT need all this banking "convenience" - I the services previously provided by these small businesses and my auto shop!
What about the auto shop? It is going out-of-business, its owner's home is in foreclosure, he is in possibly insurmountable debt, his bank has raised its fees for services and bumped his credit card interest to near 20%!
Me? I now have to pay the much higher costs charged by an automobile dealership; drive miles to obtain other services previously available nearby; and cannot conveniently purchase a Chicago hot dog.
Was the loss of all the personal and dependable services I once enjoyed worth a choice of banks that do not care or do a heck of a lot for me? You better belive it is not!
What is good for General Notors is not good for the US of A or its people. So why should I help General Motors?

I pay over $1200 for 2RX in the Medicare"Donut Hole",(worse name ever).I have money. Yhe elderly lady next store could not. She told me, I told her daughter swhe was cutting back Cardiac Rx.She died last month of guess what? I have Lupus.Some-times I take Predisone. It gives me high-blood-pressure. United Health took Diovan off their Formulary, without warning or explai8nation. I'll bet I kinow why. Don't need multiple choice. There is more. Later.

After reading the benefit statement I do not beleive the problem lies with the medical proffession. The doctor charges 120 for a visit so the insurance co will pay 37 as an 'allowable amount'in addition to my 20 co-pay. I have no issue with the doctor charging 57 dollars for the service, which is all they actually get.
I had this same problem with the orthodontist for my sons braces. When I sat down with the 'money lady' at their office the charges were different amounts for what they would be paid. WITHOUT insurance they would charge me $6000 for braces, WITH insurance, they would be paid $2000 by the insurance company and $100 per month for 24 months by me. Now that total is $4400. Keep in mind I have added the monthly cost of $20 for the insurance premium, okay? So, when I offered to pay the %4400 cash upfront to save myself a few bucks (namaely the monthly premiums) I was told they could in no way accept that arrangement as it would be against their agreement with the insurance company, and they could dropped from the ' in- network' list.
All I see here is total artificial inflation of the medical costs to falsly justify having the insurance.

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