Affordability, not access, big issue for small business

The insurance industry's shift to managed care in the last five years, along with mounting per-enrollee costs, have left small businesses straining to maintain coverage for their employees, according to Randy McConnell, public information officer for the Missouri Department of Insurance.

Employers are having a much tougher time affording insurance for their employees, and the outlook for the next several years could be bleak, he said.

"Despite small reforms, we still have the problem of a million people losing their health care coverage each year in our country," McConnell said.

"That translates into about 50,000 people a year in the state of Missouri. Employers who drop their insurance coverage continue to be the main contributors to the growing uninsured population."

The mid-1990s HMO flood, once thought to be a boon for employers and the insured alike, has turned into a financial disaster.

"For those companies who retained coverage, the intense interest in HMOs kept prices low. To their dismay, prices were so competitive that the HMOs lost their shirt," McConnell said.

As a result, rates have since soared.

Legislative changes, both state and federal, have helped increase small business' access to coverage, but affordability seems to be the driving force behind the precarious insurance situation.

"In terms of being denied coverage, businesses have turned that situation around," McConnell said. "But the laws did not address that a business could simply be priced out of the market."

According to McConnell, industry data points out that HMO costs per enrollee went down 8 percent in 1996, then shot up by 10 percent in 1997.

Although 1998 figures are not available, industry analysts say that per-enrollee costs for larger businesses could go up another 5 percent to 10 percent, with smaller companies taking as much as a whopping 25 percent increase.

Missouri House Bill 718, now pending, could be the ray of hope that Missouri's small businesses need if they are to continue offering health care coverage to their employees, according to McConnell.

"It includes several measures that would prove beneficial to small businesses and self-employed individuals," he said. "The bill would allow businesses to join health care purchasing co-ops, and would allocate state money to start the co-ops."

Cooperative buying arrangements would give smaller business the chance to purchase coverage at rates previously only available to larger companies. McConnell said this would be a significant leg up over the current purchasing constraints on small businesses.

"Small businesses have no market leverage at all at this point," he said. Another substantial benefit proposed in the bill would be tax deductibility of health care costs for smaller businesses.

Should these changes survive the legislative process, they could go a long way toward helping small businesses retain health care coverage for their employees an important point for companies struggling to recruit and retain skilled labor.

"For those employers who need to attract workers, dropping coverage is not going to work," McConnell said, adding that the tight labor market works in the employees' favor by causing potential employers to work harder to keep insurance coverage.

Merger activity among insurance companies has wreaked havoc with the insured over the last few years, and Springfield has been in the eye of the merger storm. "Southwest Missouri was one of the hot spots last year for the contract negotiation frenzy," McConnell said.

Although a Missouri House measure held that contract negotiation failure would no longer be an excuse for not paying for services (pursuant to a 90-day window), switching networks, and sometimes primary care physicians, is inevitable when HMO contracts are shifted around.

Is managed care here to stay? The answer might not be as cut-and-dried as you would think, McConnell said.

"Who knows?" he said. "HMOs didn't even exist 10 years ago, and now they are dominant."

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