Small-business health plans clear way for savings

In February, a security alarm in a U.S. Senate building sent senators scurrying for safety. Fortunately, it was a false alarm and soon, the all-clear signal was given. But the incident brought to mind other Capitol Hill alarms that have long been warning lawmakers of a dangerous threat to the health and safety of millions of Americans. Yet these pleas have gone almost unheeded.

For years, America’s small businesses have been signaling that uncontrollable health insurance costs are bearing down on them like a runaway freight train. They’ve warned that a collision is inevitable because the nation’s health insurance system has them tied fast to a system that leaves few options for escape.

The U.S. House of Representatives has tried to clear the path, passing legislation eight times that would authorize small-business health plans to operate across state lines, giving small firms the chance to band together to purchase affordable health benefits. By participating in a small-business health plan, small-business owners take advantage of the group’s bargaining power, economies of scale and administrative efficiencies.

Unfortunately, on the Senate side of Capitol Hill, even though several free-enterprise-friendly senators have attempted to bring the issue up for consideration, no action has been taken to prevent the crash. But now, clear evidence is ringing out with a sound more akin to the clanging of a slot machine that’s just hit the jackpot. It’s heralding the arrival of conclusive evidence that small-business health plans can truly be a cash-saving solution.

Virtually anyone familiar with the health insurance cost explosion knows that one sure way to reduce the rise of premiums is to reduce the costs of administering health insurance plans. All those accounting services, audits, case management tasks and enrollment functions quickly add up.

But a new study by the National Federation of Independent Business Research Foundation clearly points the way to a viable health care solution.

Researchers examining small-business health plans analyzed factors such as administrative costs and functions, and the plan executives’ analysis of their plans compared to other traditional plans. The research also looked at the competitive dynamics of the health insurance market.

Researchers found that small-business health plans were significantly less costly than traditional health-management or preferred-provider organizations – 14 percent less costly, in fact – because the small-business health plans had lower administrative costs due to a skillful combination of in-sourcing and out-sourcing practices.

Participants in small-business health plans chose to in-source sales and marketing functions and out-source others, such as accounting, case management and claims adjudication. The effective management of the administrative functions of health insurance allows small-business health plans to keep costs to a minimum for employers and their employees.

This research sounds an all-clear signal for the U.S. Senate to get to work to pass legislation to authorize these efficient and cost-effective plans to function nationwide. Doing so will give small businesses an affordable opportunity to offer health coverage to employees, in addition to improving the overall health care market by introducing new competition.

Jack Faris is the president of the National Federation of Independent Business, a small-business advocacy group. He can be reached at www.nfib.org.[[In-content Ad]]