You’re a small business owner with two choices for a hire – a 45-year-old female smoker who’s had some health problems and a 22-year-old guy, no kids, who plays racquetball every morning and kayaks on the weekend. Both are identically qualified for the job – but based on the current state of health care premiums, who’re you gonna pick?
That’s one of the dilemmas that the “Health Reform RI 2000” legislation currently on the fast track in the General Assembly aims to resolve, in its quest to provide much needed predictability for small businesses looking to provide affordable health insurance for their employees.
Although the major focus of the bill is “stabilizing” RIte Care and stemming the flood of employees from employer-sponsored plans, it also seeks to alleviate the burden for small businesses that are now subject to widely varying premium rates based on their employees’ health.
Recognizing that the cost of obtaining health insurance, particularly for small employers, is unstable, the legislation imposes new regulations on insurers by borrowing reforms already in place in New England and across the nation, said Christine C. Ferguson, director of human services.
Small businesses with two to 50 employees would be guaranteed the ability to purchase any product sold by any health insurer in the small employer market, and the maximum premium differential for businesses that purchase the same benefit plan would be set at 4 to 1 for two years and 2 to 1 thereafter.
This means employers could not treat classes of employees differently, Ferguson said. Currently, because there’s “so many rating methods,” depending on the health of their employees and overall experience of the group, one business “could be paying 10 to 15 times higher rates” than a similar business across the street. “The smaller the group of people that is the more intense it is,” she said.
By spreading the risk over a larger group the new law would give employers the benefit, over time, “to know rates won’t swing wildly because of the composition of the people they employ.”
In devising the legislation, Ferguson said they found that the same family plan for the same family could vary from as much as $450 to $1,000. This inability to know in advance their overhead costs “is one of the reasons small businesses are so frustrated,” Ferguson said.
In Maine the current differential is 1.5 to 1, in Massachusetts it’s 2 to 1, in New Hampshire it’s 3 to 1, and in Vermont, there are no differentials at all, everybody’s charged the same rate.
“The insurers are leery about it and that’s to be expected,” Ferguson said, adding that the law may “cause changes in the marketplace.”
But in general, business folk have been supportive of the bill, Ferguson said. “They understand there’s a little bit of risk,” and while the changes are revolutionary for Rhode Island, “it’s not like we’re creating something new that nobody’s ever tried.”
Under the reform, health plans may continue to use age, gender and family composition to calculate premium rates but won’t be able to use geography, industry/occupation, health status (subject to limited phase-in), claims experience or duration of coverage, Ferguson said.
Rhode Island would also be brought into compliance with 1996 federal standards that guarantee insurance portability so that someone who leaves or loses a job will be able to get health insurance through the new employer – and would limit periods of exclusion from health insurance for preexisting conditions.
Another feature of the law is a new premium assistance program called RIte Share to assist low income individuals and families with paying their share of employer-based health insurance. Ferguson said those who left their employers’ programs this past year for RIte Care were pretty much “across the board,” but were “particularly low income families that just couldn’t afford the premium share,” which in the case of some family plans, were as much as $400 a month. “My sense is that the employers understand,” Ferguson said, and “never intended to get a windfall from this.”
Under the new law, the state would assist employees to pay their share of health insurance premiums if it is more cost effective than to have the entire cost of the plan covered by the state, and all individuals who are financially able to do so will be required to contribute to the cost of their health insurance premiums.
Adults or children now enrolled or applying for RIte Care or RIte Share who are over traditional Medicaid eligibility levels would be considered ineligible under the new law if the employer or dependent has access to insurance where the employee premium share is less than $40 a month for individual or $100 a month for a family, or where the employer pays 80 percent or more of the family premium.
Ferguson said “most employers for family coverage pay 30 to 40 percent,” with the higher employer contributions tending to come from large municipal and government enterprises and larger companies, which can pay as much as 80 to 100 percent of individual coverage. “Most small businesses can’t afford that,” she said, although “we do have in Rhode Island one of the most generous employer communities,” with the vast majority covering more than 50 percent of an individual’s health insurance premium.
Under the new law about 4,000 people would be moved off RIte Care and back onto employer provided insurance and 4,000 new people would be blocked from signing up next year. The cost of the program would be $189 million, with the state’s share at $82 million, or 43 percent.
If no changes were enacted, the RIte Care program would cost $253 million in 2002 and $291 million in 2003, with the state still responsible for 43 percent of that. With the plan, the costs are projected at $201 million for 2002 and $232 million in 2003.
This year RIte Care year cost $150 million in state and federal money, and next year is expected to cost $189 million, with an anticipated 124,119 to enroll before June, 2001, Ferguson said.
Scott Fraser, spokesman for Blue Cross & Blue Shield of Rhode Island, the state’s largest insurer, refused to comment on the legislation last week before press time, fearing it might change too much during the course of General Assembly discussion.
But Ferguson said aside from a couple of minor tweaks, “I don’t think they’ll be significant changes” from the package as introduced. She also said insurers have been “absolutely visceral” against anything that would allow purchasers to band together, although she favors such buying cooperatives. “I’m not a big fan of regulation,” Ferguson said. “However the insurance industry is much more comfortable with regulation than negotiation.”
