By Joseph Q. Jarvis
Salt Lake Tribune
February 12, 2006
Two days ago a bill, HB122, intended to provide Utah’s small-business owners with a new option for employee health benefits, was eviscerated by the Utah Health Insurance Association.
HB122, as originally written, authorized Public Employees Health Plan (PEHP) to organize a health benefit plan for employees of Utah’s small businesses. Written into the bill were planning steps which were adequate to identify and solve all problems and concerns related to cost, outreach and risk management.
A survey of more than 200 small-business owners in Utah found that their average employee age is 10 years younger than the average age of PEHP’s current beneficiaries. It is therefore possible that a PEHP small-business plan could be good both for small businesses and for the taxpayers who buy PEHP benefits for state, county and municipal employees.
Now, instead of providing a plausible solution to a critical problem, the bill merely proposes that a health insurance-dominated commission study the issue.
Recently, a Goldman-Sachs financial analyst observed that the Big Three U.S. automakers are “HMOs with wheels” that only happen to make cars. A well-known Princeton health economist added: “It’s insane to think that a company embedded in a fierce global competition can function as an insurance system.”
Yet U.S. health policy continues that insanity: American employers outspend Canadian employers 13-to-1 for the purchase of employee health benefits and 8-to-1 for the internal costs of arranging for and supervising benefits.
Nowhere do those costs hit harder than for small businesses. While 95 percent of the more than 600,000 Utahns working for businesses with 50 or more employees have a health benefit, only approximately half of the 250,000 Utahns working for small businesses do. Approximately 25,000 Utah small-business employees have lost their health insurance since 2000.
The vast majority of the 300,000 uninsured in Utah are small-business employees or their dependents. Unquestionably, the loss of health benefits can be attributed to the rapid rise of health premiums, which have risen five times faster than earnings over the past five years and double the national rate.
Health costs are making it difficult for Utah small businesses to compete either in the market for their goods and services or in attracting skilled workers. Ninety percent of Utah’s small-business owners indicate that health benefit costs negatively impact their profitability and employee retention.
If we care about economic development in Utah, we must find a way to make health benefits sustainably affordable for small-business employees.
High health care costs in the United States are not caused by Americans overutilizing health services, as some claim. International comparisons document that physician visits and hospital bed days by American patients are at or below the per capita average of other nations.
Rather, high American health care costs are caused by the related failures of efficiency and economies of scale. American health financing has a bureaucratic burden five times that of other industrialized nations.
Health insurance companies pay to deny health care. In response, providers of health care hire staff to extract payment from insurers.
Because insurers fail to aggregate people into large risk pools, they fail both to spread and manage risk optimally and to maximize group purchasing power to moderate prices.
It stands to reason that a search for sustainable health financing for small-business employees in Utah should begin by identifying the most efficient health financing system in the state and making that available to small-business owners.
Unquestionably, the Public Employee Health Plan is Utah’s most efficient payer for health services. At 3.8 percent, PEHP administrative costs are about one-fourth of the average similar costs for the state’s commercial carriers.
Unfortunately, by state statute, PEHP is currently unable to offer a small-business health plan, which means that while the state’s commercial carriers are apparently increasingly unable to meet the needs of small business, PEHP is not allowed to even try.
The only opposition to the bill came from commercial insurance carriers. It is apparently not in their interest to allow small businesses to experience sustainably affordable health benefits through the state’s most efficient payer.
If you support the interests of small-business owners, employees and taxpayers over health insurance carriers, call Gov. Jon Huntsman Jr. and your legislators and tell them to reinstate the original intent of HB122.
Joseph Q. Jarvis is a physician and president of the Utah Health Alliance.
