June 1, 2007
By Beverly Gossage
Missouri residents may soon have the chance to take control of their health insurance. Although the standard employer-based model for health insurance coverage leaves a remarkable number of people out, an overwhelmingly bipartisan bill recently passed by the Legislature, HB 818, would allow a flexible, portable system of insurance coverage that employees can depend on even in a turbulent economy where jobs are increasingly transitory. Scheduled to be signed by the governor this afternoon, the bill offers a common-sense approach to health care reform — not more government intervention and bureaucracy.
Most of the nation’s uninsured work for small companies, and only 42 percent of Missouri small businesses offer health insurance. Those who don’t provide plans to their employees have several reasons: the hassle of selecting a plan each year; employer contribution and employee participation requirements; lack of retention among employees; and the high cost of group premiums. These concerns are addressed by HB 818.
Shopping for an affordable health insurance plan to meet employees’ diverse needs is every employer’s nightmare. Under HB 818 the employee would become the consumer and the purchaser of insurance, selecting a personal plan from a marketplace of carriers and plan designs. Employers would merely contribute to their employees’ premiums.
Small group plans require 50 percent of the employees to participate and 50 percent of the premium be paid by the employer. Part-time employees are not counted in this participation requirement, and are frequently left without coverage. Since HB 818 gives employers the option of how much to contribute to the premium and does not regulate employee participation, employers would be more likely to assist with the cost of health premiums
Under the current employer-based health care system, a constantly transitional workforce poses two problems. It makes it difficult for small businesses to budget health insurance costs, because each new hire and termination affects the group dynamic. It also produces a high percentage of temporarily uninsured workers, who make up 45 percent of the uninsured. HB 818 would make it easier for employers to budget costs, and provides insurance portability for workers moving between jobs.
One-size-fits-all small group health plans are often more expensive than individual plans. For example, last year in Missouri the average small group premiums for single employee and family coverage were $292 and $765 respectively. By comparison, the average individual policy premiums for single and family were $192 and $332.
Recognizing the trend toward individual policies, carriers known for being large group providers have entered the individual market in recent years. Many already offer convenient “list bill” options, which permit employers to payroll-deduct for individual policies and pay one check for all the employees’ premiums.
Family discounts can be substantial if a family is on one plan, but some small group plans may splinter a family’s carriers. With HB 818, a family could have one employer-independent policy, and each spouse’s employer could contribute to the premium.
HB 818 would permit funneling individual premiums through the Cafeteria 125, which allows pretax contributions for both employers and employees, giving them both an incentive to contribute. This would equalize the tax discrimination that has favored those purchasing health insurance through group plans. HB 818 would also allow self-employed business owners a state tax credit for personal health premiums.
When given free choice, many consumers choose health savings accounts with a qualified health plan. The premiums are usually 35 percent to 40 percent lower than traditional plans, out-of-pocket expenses are pre-defined, employers and employees both reap tax advantages, and funds in these accounts grow with interest and may be used to pay health care expenses for the entire family. They can even be saved for retirement, if not used.
HB 818 also adds an HSA plan to the state risk pool and Missouri state employees’ health benefit package. This provides the popular tax-advantaged option for those who do not qualify for an individual plan from a private carrier, and for those who work for the state.
Individual policies can provide an incentive for healthier lifestyles. Because employees with these plans are not insulated from the true cost of their premiums, or the cost of care, they can see how unhealthy, sedentary choices can directly affect the cost of their premiums. This could well have the effect of promoting wellness and providing for more judicious utilization of insurance benefits.
This bill’s provisions allowing for small employer contributions to individual plans with pretax advantages can turn uninsured employees into insured consumers. This benefits all of Missouri.
Beverly Gossage is a consumer-based health care expert and research fellow with the Show-Me Institute, which sponsored Gossage’s March 5 presentation to the Missouri Legislature on HSAs and free-market approaches to health insurance reform. HB 818 incorporates many of the ideas Gossage presented.