Addressing the Small Group Health Insurance Crisis

by Frank Knapp, Jr., SC Primary Health Care Association Newsline

In the late summer of 2000 The SC Small Business Chamber of Commerce held public forums around the state to hear what was on the minds of small business owners. Consistently at every meeting we heard a very clear message—group health insurance premiums were unaffordable. Three years later, the small group health insurance crisis is much worse.

The latest data shows that 65% of all South Carolina businesses with less than 50 employees do not offer health insurance to their workers. That means the employees of nearly 60,000 small businesses in this state do not even have the opportunity to have group health insurance from their place of work. And these numbers are going to grow, as more and more small businesses cannot afford annual double-digit increases in their health insurance premiums.

Since our forums in 2000, the Small Business Chamber has put group health insurance at the top of our agenda. We have worked to educate the public and SC General Assembly about the issue. We have partnered with the SC Department of Insurance on a Federal Grant to analyze the problem and develop policy recommendations. And we have had legislation introduced to better enable small business to deal with the rising cost of health insurance. It is the latter two efforts I will briefly describe.

In 2002, the SC Department of Insurance received a state-planning grant from the U.S. Health Resources and Services Administration. A Health Insurance Policy Advisory Committee, upon which Ms. Lathan Woodard and I serve, was created and has worked with the DOI and other state agencies to understand this enormously complex issue. Governor Mark Sanford has stated his support of the efforts of this committee.

While there are numerous drivers of the cost of health care—new technology, aging population, the cost and marketing of prescription drugs, utilization, inflation, mandates, cost shifting, etc—our committee has focused on understanding the demographics of the uninsured and has concentrated it’s policy development primarily on dealing with the uninsured working poor. Recommendations will be made in early 2004 that will address this “cost shifting” issue.

Also in 2002, the Small Business Chamber began championing an idea that would empower small businesses across the state to better address health insurance costs. Insurance is essentially a game of numbers. The more lives that are covered under a policy, the more the risk and premium increases can be shared. Also, with large numbers of employees comes bargaining power with insurance companies. Big businesses have used the power of large numbers of employees for years to command lower and more stable premiums.

Obviously, small businesses by definition individually lack the power of numbers. However, several professors from Clemson University had come up with the idea that a vehicle established by the State of South Carolina could allow tens of thousands of small businesses to aggregate for the purpose of obtaining health insurance either by self-insuring or as a purchasing cooperative. All premiums would be paid by the private businesses and administrative costs incurred by the state would be reimbursed through premiums. In this way, small businesses would be able to take advantage of large numbers to control health insurance costs the way big business has done.

State legislation to make this plan a reality was introduced in 2003. This year the Small Business Chamber hopes to move this entire issue, including the legislation, to the forefront of the General Assembly’s agenda. We are pleased that in his recently released Jobs and Economic Growth Plan, Governor Sanford recognizes the importance of small businesses banding together for collective clout regarding health insurance.

It is clear that if South Carolina and other states do not address the small group health insurance crisis soon, attempts to create a national health insurance program will eventually succeed. Even the business community that is wary of such an idea will eventually welcome any relief to a health insurance system that is serving far too few and costing far too much.

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