Recently, the U.S. Department of Labor cleared the way for small employers to band together more easily, in the hope of lowering insurance premiums, thereby creating negotiating power and providing additional insurance options. Many small business leaders see this as the savior for small business group health insurance.
Not so fast! While this association avenue provides more options and may generate temporary savings for employers with premiums higher than the norm, it’s been tried before with little, if any, success. We are setting the stage for long-term failure, unless we change the model.
The truth is that most small employers are already part of huge “small group community rating pools” without even knowing it. The proposed so-called association plans can’t come near the size of the rating pools many small businesses are already in.
Then consider that small businesses/sole proprietors are among the worst claims risks. As such, many “risk pools” are heavily subsidized by the federal government and insurance companies’ large-employer clients. The association plan’s better-risk employers will end up finding more reasonable pricing elsewhere, leading to — you guessed it — the “savior” pool’s unaffordability and ultimate collapse.
Transparency is the key
The problem really isn’t insurance. The bottom line is that health care is not a real business, despite being allowed to act like one. Doesn’t matter if you have five or 5,000 employees — if you’re in a group plan, the fee a large teaching hospital charges for a diagnostic or surgery does not change, which leads us to a word many of our politicians shy away from — transparency.
How are the prices of health care services and prescription drugs determined? Ask your hospital for a list of charges for a no-complications maternity stay. You won’t get it. The largest hospital and medical provider groups are responsible for disproportionately driving up costs. They are powerful, untouchable and have the public over a barrel.
The cost of medical care in the United States is four times that of comparable systems worldwide. There exists nearly $280 billion of fraud in our system; combine that number with lack of efficiency, data cohesion and waste, and hundreds of additional billions are added to that astounding sum.
So, what can be done to mitigate the out-of-control spiraling cost of health care?
Break up the largest hospital groups that are driving up costs. Mandate complete cost transparency among all medical, pharmacy and insurance providers. Allow development of insurance products that recognize the cost and quality realties of each provider. Encourage acceptance of a reference-based reimbursement system.
At the employer levels, embrace a comparative prescription drug environment so employees and dependents can access drugs through their plan, the manufacturer, private or government-sponsored assistance programs.
The per-unit cost of care is the primary problem and high premiums are merely the symptom. There needs to be a robust system in place to lower the cost of services running through the Department of Labor’s Association plan. Telemedicine outside the insurance company lowers costs; in fact, the American Medical Association estimates that as many as 70 percent of emergency room, urgent care and primary care visits are unnecessary and can be handled via telemedicine.
Another cost-cutting measure? How about a mandated “second opinion” program separate from insurance? Studies show an absolute return on investment for consumers seeking independent second opinions for serious ailments.
And let me make another plea for a comparative prescription drug environment. By connecting members with coupons, prescription-assistance programs and inexpensive generic lists, many consumers will pay for prescriptions outside of insurance, thereby reducing drug claims running through group medical plans. Seems like a no-brainer, right? So, why aren’t we doing this?
To those out there developing association/group plans — I implore you to consider that 8 percent of the insured American population account for 60 percent of the cost of claims. The price of large claims is the strongest driver of group insurance premiums.
We need innovative features that can make health care affordable, and we also need politicians with the courage to take on the cost issue. I have to say that I was disappointed during a recent trip to D.C., when I asked a few elected officials about health care costs.
The response? “Health care fatigue.”
It’s our imperative to learn from past association health plan failures and recognize the true causes for the rise in premiums, otherwise the cost of health insurance will continue to rise. It’s a symptom that needs much more than a bandage.
Michael McKenna is the CEO of Comprehensive Benefit Administrators. Find more at cbacompanies.com.