the breaking point why health care reform is crucial to small business
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The Breaking Point Why health care reform is crucial to small business. By: Todd O. McCracken, President. Why Does Small Business Matter?. Small Firms: Represent 99.7 percent of all employer firms Employ half of all private sector employees - PowerPoint PPT PresentationTRANSCRIPT
The Breaking Point Why health care reform is crucial to small business
By: Todd O. McCracken, President
Why Does Small Business Matter?
• Small Firms:– Represent 99.7 percent of all employer firms– Employ half of all private sector employees– Create between 60 to 80 percent of all net new jobs– Produce 13 to 14 times more patents per employee
than large firms
• The small business share of employment remains around 50 percent
• 78 percent of small businesses have fewer than 10 employees
• 61 percent of small businesses are micro-businesses with fewer than 4 employees
0
11
25
43
59
73
87
03 5 7
1014
18
04
710 12
1520
0
10
20
30
40
50
60
70
80
90
100
2000 2001 2002 2003 2004 2005 2006
Health Insurance Prem ium s Inflation Worker's Earnings
Total Premium Increase Compared Against Other
Economic Indicators 2000 - 2006
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2000-2006
8.2
10.9
12.9
13.9
11.2
9.2
7.7
3.1 3.3
1.62.2 2.3
3.5 3.53.9 4
2.63
22.7
3.8
0
2
4
6
8
10
12
14
16
2000 2001 2002 2003 2004 2005 2006
Health Insurance Prem ium s Inflation Worker's Earnings
Annual Premium Increase Compared Against Other
Economic Indicators 2000 - 2006
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2000-2006
0
2
4
6
8
10
12
14
16
18
2000 2001 2002 2003 2004 2005 2006
Very Small Businesses (3 to 24 Workers)
Small Businesses (3 to 199 Workers)
Large Businesses (200+ Workers)
Total
Annual Premium Increase by Employer Size
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2000-2006*2000- 2003 data uses firm size of 3 to 9, 2004-2006 reports consolidated very small businesses to 3-24 workers
Comparison of Premium Increases by Employer Size
16.5
12.5
10.2
16.615.5
13.2
11.8
9.88.9
10.5
8.8
7
0
2
4
6
8
10
12
14
16
18
Very Small Businesses (3 to 24Workers)
Small Businesses (3 to 199Workers)
Large Businesses (200+Workers)
2001 2003 2005 2006
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2000-2006
*2001 and 2003 data uses firm size of 3 to 9, 2005 and 2006 reports did not distinguish between 3 and 24 employees.
Percentage of Businesses Offering Health Benefits by
Firm Size
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2006; KPMG Survey of Employer-Sponsored Health Benefits, 1996.
99%
58%
99%
58%
98%
55%
98%
52%
99%
47%
98%
48%
98%
57%
0%
20%
40%
60%
80%
100%
120%
Very SmallBusinesses (3 - 9
Employees)
Large Business(200+ Employees)
2000 2001 2002 2003 2004 2005 2006
63
65
63
62
61
60
59
56
57
58
59
60
61
62
63
64
65
66
2000 2001 2002 2003 2004 2005 2006
Overall Percentage of Firms Offering Health Benefits,
2000 - 2006
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2006
Percentage of Firms Offering Health Benefits, by
Firm Size in 2006
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2005
48%
73%
87%92%
98%
0%
20%
40%
60%
80%
100%
120%
3 to 9 10 to 24 25 to 49 50 to 199 200+
Firm Size by Number of Employees
Percentage of Businesses Offering More than One Health Plan Option
by Firm Size
20
39
57
79
0
10
20
30
40
50
60
70
80
90
Sm all Firm s (3 to 199Workers)
200 - 999 Workers 1,000 to 4,999Workers
5,000+ Workers
Percentage of Small Employers Considering Changes to Employee
Health Plans
Considering change in the next year
51%
Not considering any changes in the next year
49%
Source: NSBA Member Survey, October 2005
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2005
Expected Changes to Employee Insurance Plans
44%
22%
41%
15%
3%
24%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
IncreasingEmployee Share
ReducingBenefits
Switching to High Deductible
Plan
ReducingContributions to
HSA/ FSA
DroppingCoverage
Other Options
Source: NSBA Member Survey, October 2005
Percentage of Employee Premium Paid for by
Employer
50% to 80% of Premium
21%
80% to 99% of Premium
19%
100% of Premium30%
49% or less of Premium
30%
100% of Premium 80% to 99% of Premium 50% to 80% of Premium 49% or less of Premium
Source: NSBA Member Survey, October 2005
Employee Premium Cost-Sharing Trend
Small vs Large Business
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
2003 2004 2005 2006 2007 2008 2009 2010
Em
ploy
ee S
hare
Large Employers 1-99 Employees
Source:Hewitt Associates, US Bureau of Labor Statistics
0
5
10
15
20
25
30
Ratios 2.5 10.8 3.3 4 1.2 7.9 7 9.3 20.3 23.6 1.7 3 2.3 4.2 2.5 8.2 8.1 2 3.5 2 1 14 2.5 21.3 27.4 1 4.9 20.5 27.3
AK AL AR AZ CA CO DE FL ID IL KS MA MD ME MI MN NC ND NH NJ NY OK SC SD TX VT WA WI WY
Source: National Association of Insurance Commissioners
Allowable State Variations Within a Particular Plan
Piecemeal Solutions:Why They Won’t Work
• Association Health Plans (AHPs)– Attempt to provide cost-cutting by allowing trade-associations to
create a national pool for their members under a new set of federal rules
• Would create adverse selection and segment the market due to AHP’s ability to skim off the healthiest individuals.
• Small Employer Health Benefit Plans (SEHPB)– Patterned after federal employees’ health plan, SEHPBs would
establish a federally-run insurance pool for small businesses• Would create adverse selection on part of the SEHPB due to a rich
benefit package, guarantee issue and government subsidies on the plan
• Enzi Health Care Proposal– Would allow for limited AHPs with state oversight and preempt
certain states’ rating rules• Best of all three initiatives, but doesn’t go far enough in creating
broad reform and enhancing consumer involvement
NSBA Health Care Proposal• Individual Responsibility
– All individuals would be required to obtain coverage providing for the spreading of risk with all individuals in the insurance pool.
• Broad Reform of the Insurance Market– Establishment of a federally-defined basic minimum package that is truly basic in nature– Actuairily-determined rate bands established within which insurance companies could
price their products– Insurance companies would operate under a guarantee issue system– States would retain oversight and authority over all plans under the federal framework
• Provide Subsidies for Low- Income– Individuals and families would receive federal financial assistance for health premiums,
based upon income• Reshape Health Insurance Tax Incentives
– Tax parity for all purchase of health insurance, whether purchased through an employer or individually
– Cap tax-preference on health expenditures at the premium level for the required package
• Reduce Costs and Improve Quality– Instituting increased consumerism requires ample information be available to
consumers– Increased IT in health care through electronic medical records and procedures to both
reduce errors and increase efficiency– Pay-for-Performance based on actual health outcomes and standards established
through evidence-based indicators and protocols