We Get Letters...

Christopher Parks, the proprietor of the Med Bill Advisor blog, tipped us to an interesting article in BusinessWeek. Entitled “Fighting Off Health-Care Headaches,” it’s essentially a survey (as in primer, not questionnaire) of various health insurance problems and potential solutions.

Chris blogged briefly about this article on his site, and asked for our take on it, as well.

The underlying thesis of the article is that group health insurance premiums continue to rise, and this disproportianately affects small groups. According to Stacy Perman (the author), there are a number of interesting solutions:

First up, congress is contemplating legislation that would create Small Business Health Plans (SBHP’s). Also known as AHP’s (association health plans), the idea behind these plans is that, by banding together, small businesses can leverage larger numbers for better plans. Call it “IGA insurance:” my store has 5 employees, yours has 10, his has 20, etc, but together we have 100, and can catch a break.

Nice in theory, but, as Bob points out:

The “new” SBHP is just a re-packaged MEWA (multiple employer welfare assocation).

The economies of scale argument is valid. You can administer benefits for 100,000 employees for less (per capita) than trying to administer the same plan for 10 employees.

By offering a national, self funded plan, you can also bypass state mandated benefits which creates further savings. But who is left out as a result?

Most (if not all) states now require coverage for diabetics including their medication and medical equipment (syringes, A1C meters, etc.) but there are no federal laws requiring these items to be covered. So in theory (if not practical application) a SBHP could cover diabetics but not their medication and be in compliance with federal guidelines.

Same can be said in covering treatment by paraprofessionals such as PA (physician’s assistants), nurse practitioners, and social workers. Several states have passed laws that require carriers to pay for treatment by these paraprofessionals but there are no federal laws requiring the same.
Beyond these issues, managing a national SBHP/MEWA is a challenging task that has always failed in the past. Eventually these plans collapse or else become so expensive (mostly because of adverse selection) they are no longer attractive.

Another solution is “outsourcing” of benefits, aka employee leasing. The idea is that a business owner would no longer, well, employ his employees, but would contract out all employee “issues” (health care, worker’s comp, etc) to a staffing agency.

The attraction here is that it would relieve the smaller employer of many of the day to day headaches involved in managing his employees.

Intriguing though this might be, it’s not really new, nor has it proved to be a popular alternative. One reason for this may be that the other costs of setting up such an arrangement negate any group health savings.

The article also discussed “dual option” arrangements. For years, larger employers have offered so-called “cafeteria” plans which allowed their employees to choose from a variety of different insurance plans and companies. These can be expensive to administer, so smaller employers couldn’t afford to offer them, nor were carriers willing to make them available. Now, more carriers are offering small groups the option of offering more than one plan design. For example, an employer could offer a less expensive, less “frilly” medical plan, and offer employees the option of “buying up” to a more comprehensive one.

Or, an employer could offer to fund an HSA for those employees who chose HDHP’s, while cutting back on funding for the PPO.

All in all, an interesting article. My only real quibble is with the opening paragraph, which parrots the now-debunked myth of 45 million uninsured.

But that’s another post.