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HEALTH INSURANCE
Helping the Uninsured
Though health care in America is the best in the world, for those without health insurance, a trip to the hospital may be out of reach. So are doctor’s visits, prescription medication and annual check-ups.
At last report, five million Americans have lost their health insurance coverage over the last five years. The total number of uninsured Americans is now 45 million.
More than 40 percent of uninsured adults who are not elderly have no regular source of health care. Many delay or forgo needed care because they fear high medical bills. In 2003 nearly half of uninsured adults postponed seeking medical care, and over a third reported they needed but did not get medical care in the past year.
More than one-third of the uninsured reported a serious problem paying medical bills in the past year. Nearly a quarter were contacted by a collection agency.
A recent report on the uninsured by the Institute of Medicine (IOM) found that adults without health insurance have death rates approximately 25 percent higher than adults with private health coverage. IOM estimated that for the year 2000, 18,000 deaths among adults between the ages of 25 and 64 could be attributed to lack of health insurance.
We have to find ways to make insurance more affordable for families. The average family premium of a PPO in 2004 was only slightly less than the total annual wages of a full-time worker earning the federal minimum wage. In Illinois there are more than 150,000 households that earn less than $10,000 per year. The average health insurance premium for a family is $10,217.
We must also make insurance more affordable for businesses. Mercer Consulting, a respected human resources consulting group, conducts a survey of American business leaders every year. Last year -- for the first time ever -- business owners listed the high cost of workers’ health care – not taxes – as their biggest concern. Two-thirds of the business owners surveyed said they shop for new health plans every year to try to save money.
Last year, on its annual survey, the Conference Board asked 120 of America’s top CEOs how big an obstacle health care costs are to hiring new workers. Seventy-eight percent said it was an obstacle; 35 percent – one in three CEOs in America – said the cost of health care was a major obstacle to hiring new workers.
We must make insuring more Americans a national priority.
To help solve this problem, Senator Durbin has introduced the Small Employers Health Benefits Program Act of 2005 (S.637).
Senator Durbin and his colleagues sent a letter to President Bush on March 16, 2005 encouraging him to work on a bi-partisan basis to find a solution to rising health care costs for small businesses.
| The Small Employers Health Benefits Program Act, S.2510
Senators Richard Durbin & Blanche Lincoln
Summary
The Small Employers Health Benefits Program (SEHBP) is based on the successful Federal Employees Health Benefits Program (FEHBP), which has provided extensive benefit choices at affordable prices to members of Congress and federal employees for decades. Last year, more than eight million people were banded together in the FEHBP purchasing pool and given choices among 10 national health insurance plans and a variety of local insurance plans. A total of 278 private insurance plans offered benefits to, and competed for the business of FEHBP enrollees in 2006.
By pooling small businesses across America into one risk and purchasing pool like FEHBP, the new SEHBP program will allow employers to reap the benefits of group purchasing power and streamlined administrative costs, as well as access to more plan choices.
Health plans will bid to offer benefit packages to SEHBP enrollees.
While all plans participating in the SEHBP program must adhere to state benefit mandates the Office of Personnel Management (OPM), which has been efficiently managing FEHBP for decades with less than one percent administrative cost, will ensure that the health insurers bidding for access to the pool are offering reasonable prices. OPM will free small business owners from the burden of negotiating with health plans.
Finally, participating employers will receive a tax credit to reduce the cost of covering lower income employees. If the employer contributes 60 percent or more to the health insurance premium of an employee making $25,000 or less, the employer will receive a 25 percent tax credit. The tax credit increases with the number of people covered and the proportion of premium the employer chooses to cover.
Eligibility Requirements
- The SEHBP program will be open to all employers with up to 100 employees, including the self-employed. OPM will have the authority to grant participation waivers to businesses with more than 100 employees.
- To receive the tax credit, employers must agree to pay at least 60 percent of each employee�s health insurance premium.
- All employees of participating SEHBP employers will be eligible to receive coverage through SEHBP.
Participation and Coverage
- Employees may join SEHBP upon being hired or during an annual open enrollment period.
- Prior to each annual enrollment period, employers will receive a booklet detailing the insurance plans available. OPM will work to ensure a range of choices are available, like in the federal employees plan.
- Coverage choices are made by the employee. Each individual may choose a health plan according to his or her own needs. Like the federal employees plan, the options are likely to range from fee-for-service, in which most services provided by any doctor are covered with a co-payment, to HMOs, which offer lower prices with a more limited panel of doctors, to high-deductible plans, which require the first several thousand dollars of health care coverage be paid by the employee. The bill requires OPM to ensure a range of benefit plans is available.
- SEHBP enrollees who have at least six months of health insurance coverage immediately prior to enrollment in an SEHBP plan will face no pre-existing condition waiting period. To prevent people from waiting until they get sick to enroll, health plans will be allowed to exclude coverage for pre-existing conditions for up to six months for people without coverage immediately prior to enrollment (reduced by one day for each day of immediately previous coverage). The pre-existing condition provisions are consistent with HIPAA.
- In an effort to balance premium prices with consumer protections, participating plans will be allowed to apply “adjusted community rating” to their premiums. The SEHBP plan is similar to a model developed by the National Association of Insurance Commissioners in 2000, which allowing plans to vary premiums based on age, geography and family composition within strict limits or to prevent extreme variations in price. Rating on health status, gender or industry is prohibited under SEHBP rating rules. If a state has rating rules that are stricter than the rules laid out in this bill, the state is held harmless, meaning they can maintain their current rating structure. In other words, SEHBP sets a floor.
Consumer Protections
- SEHBP enrollees will be covered by state consumer protection laws, such as benefit mandates and solvency standards. State insurance commissioners will continue to regulate solvency, grievance processes, internal review and network adequacy laws, among other things.
- Like in the FEHBP program, OPM will have the authority to require plans to limit enrollees’ annual out-of-pocket expenses.
Encouraging Participation among Health Plans
- Health plans would be encouraged to participate in the new program through temporary use of a three percent risk corridor and a reinsurance pool for high-cost individuals. Risk corridors are contractual safeguards that limit the downside risk and upside gain for an insurer. The federal government has experience with risk corridors in TriCare. The risk corridor would be in place for two years.
- In addition to the risk corridors, the SEHBP Act would set up a reinsurance pool that will initially protect participating insurers from unexpectedly high claims from individual beneficiaries. The reinsurance pool would pay 90 percent of an individual’s cost when claims exceed $50,000. The reinsurance pool would also be in place for two years.
- Once the risk pool stabilizes and insurers have claims experience on which to accurately base their premiums, the program would switch to the “service charge” system currently employed by FEHBP.
Tax Credit
- Under SEHBP, premiums will not be government-subsidized, but employers will receive an annual tax credit to defray part of the employer contribution. The SEHBP Act provides a refundable tax credit to employers for their payments on behalf of low-wage workers (those who make $25,000 or less per year.) The tax credit will be equal to 25 percent of their costs for self-only policies, 30 percent for those employees who are either married or single with a child and 35 percent for family policies. The wage limitation will be adjusted annually for inflation rate based on the CPI.
- Employers who cover more than 60 percent of their employee’s premium will receive a bonus tax credit. The bonus will be equivalent to a 5 percent add-on per additional 10 percent of premium covered. So, an employer who covers 10 percent over the required employer portion will receive an additional 5 percent tax credit. If the employer covers an additional 20 percent of the premium, an additional 10 percent tax credit will be granted.
- Employers who enroll in the first year will receive a 10 percent bonus refundable tax credit that year.
Senator Richard J. Durbin
| Table 1a: Example of Potential Costs assuming the Employer covers 60% of costs
|
Single |
Couple |
Family |
Cost |
$4,000 |
$8,000 |
$10,000 |
Employer’s 60% |
$2,400 |
$4,800 |
$6,000 |
Tax Credit |
- $600 |
- $1,440 |
- $2,100 |
Net Employer Cost |
$1,800 |
$3,360 |
$3,900 |
Employee Cost |
$1,600 |
$3,200 |
$4,000 |
Table 1b: Example of Potential Costs assuming the Employer covers 80% of costs
|
Single |
Couple |
Family |
Cost |
$4,000 |
$8,000 |
$10,000 |
Employer’s 80% |
$3,200 |
$6,400 |
$8,000 |
Tax Credit |
-$1,120 |
-$2,560 |
-$3,600 |
Net Employer Cost |
$2,080 |
$3,840 |
$4,400 |
Employee Cost |
$800 |
$1,600 |
$2,000 |
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Endorsers of SEHBP
- American Academy of Family Physicians
- American Medical Association
- American Osteopathic Association
- Consumers Union
- Small Business Majority
- American Diabetes Association
- Federation of American Hospitals
- National Association of Community Health Centers
- National Association of Women Business Owners
- American Academy of Pediatrics
- FamiliesUSA
- National Women's Law Center
- National Partnership of Women and Families
Cosponsors (in addition to Senator Durbin & Senator Lincoln)
- Senator Harry Reid
- Senator Max Baucus
- Senator Edward Kennedy
- Senator John Kerry
- Senator Hilary Clinton
- Senator Mark Pryor
- Senator Tom Carper
- Senator Joe Lieberman
- Senator Bill Nelson
- Senator Maria Cantwell
- Senator Frank Lautenberg
- Senator Tom Harkin
- Senator Herb Kohl
- Senator Jeff Bingaman
- Senator Chris Dodd
- Senator Barbara Mikulski
- Senator Tim Johnson
- Senator Mark Dayton
- Senator Bob Menendez
- Senator John Rockefeller
- Senator Barbara Boxer
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