Studies cite serious problems with health care system

Oct 1, 2003

Topping of a month filled with new and somewhat depressing studies, the U.S. Census Bureau released figures on uninsured for 2002. The recent release of three prominent reports from the U.S. Census Bureau, Kaiser Family Foundation and Towers Perrin, have prompted some to call for Association Health Plans (AHPs). However, AHPs will not solve the root cause of the reported increases in uninsured and growing health insurance costs.

According to the U.S. Census Bureau, the number of uninsured Americans has increased to 43.6 million. The Health Insurance Coverage in the United States: 2002 report cites a decrease in people covered by employer-based insurance from 62.6 percent in 2001 down to 61.3 percent in 2002. The report went on to note that the increase in young, healthy people dropping employer-offered coverage added to the overall increase.

Prior to the Census Bureau’s report, Towers Perrin released their 2004 Health Care Cost Survey. According to Jim Foreman, managing director of Health and Welfare for Towers Perrin, “Employers are facing yet another grim year of double-digit increases in health care costs.” For 2003, employers are dealing with a 16 percent increase topping a six-year trend culminating with a startling figure – companies today are paying two times what they paid in health care costs six years ago.

Finally, The Kaiser Family Foundation released earlier in September, their 2003 Employer Health Benefits Survey, which estimates that average family plans are now costing $9,068 annually. This study also points to “rapid inflation in the costs for health care services and insurer’s efforts to emphasize profitability in their pricing” as a primary cause for the ongoing health care cost increases.

Though these studies portray a somewhat dismal view of the health care arena, there are figures that indicate the problem may not be insurmountable. The Towers Perrin study estimated that increases from 2003 to 2004 may slow moderately – instead of a 16 percent increase, they predict a 12 percent increase in health care costs. Furthermore, the Census report shows that nearly 30 percent of the uninsured are between the ages of 18 to 24, which may be cause-and-effect of the fact that they’re generally healthier and therefore opt out of health insurance offerings. Contrary to popular opinion, the Kaiser study shows that large firms (200+ workers) are actually 34 percent more likely than small firms to increase the amount employees must pay for health insurance in the coming year.

While all three reports illustrate the ongoing problem with health care in the United States, the National Small Business Association is highly doubtful that, as proponents claim, AHPs will help. Rather, we fear that AHPs stand to worsen the market altogether.

Earlier studies by the Congressional Budget Office and Mercer Risk, Finance and Insurance show that most of the enrollment in AHPs will come from businesses that already provide insurance. Only 1 in 14 participants of AHPs would be newly insured. Furthermore, this legislation would actually increase the number of uninsured by an additional one million people. The CBO goes on to say that only a small percentage of small firms will see reduced premiums, leading to even further increased costs of healthcare for the 80 percent of small businesses not participating in an AHP.

Most importantly, AHPs do absolutely nothing to address the fundamental factors driving health insurance costs. Not one provision in the AHP legislation makes any mention of cost-containment, and tossing a leaking life-vest to a drowning system is simply irresponsible.

NSBA is very concerned about the new figures released recently, however we are even more concerned that AHPs, if passed will make the situation even worse. AHP legislation will increase a majority of small business healthcare premiums, it will erode the high-level of benefits we are accustomed to and deserve, and it will not fix the problem – on the contrary, it will magnify it.