Small businesses still await reform of health-insurance rules

By JESSICA HULETT
Capital News Service
LANSING — Employers continue to be “picked through” by insurers as bills are still pending in the state House to reform health-insurance premiums for small businesses.
Advocates of the bills doubt that action will be taken yet this year.
“Rate banding” would require all insurance agencies to set their rates within a range from their highest risk rate to their lowest. That would allow competition in the industry that currently doesn’t exist, small-business groups contend.
Blue Cross Blue Shield of Michigan is the insurer of last resort for the state and must abide by community rating, which allows all small business groups with fewer than 100 employees to pay the same amount for service, no matter what health conditions are. That gives Blue Cross more unhealthy risks.
“There is no incentive to be healthy,” said Barry Cargill. “There is no individual responsibility because everyone pays the same. Right now, you can’t really shop around.”
Cargill, vice president of government relations for the Small Business Association of Michigan, said private insurers don’t have to follow community rating and can find healthy risks by “cherry picking.” They offer rates to healthy risks that are lower than the community rating or to unhealthy risks that are higher.
“Rate reform is the foundation of getting this under control,” Cargill said. “But it’ll just moderate, it won’t decrease the costs.”
Frank Smith of Suttons Bay, a sales manager in Traverse City for Blue Cross in Northern Michigan, said new, brand-name drugs are contributing to the high increases of health insurance costs. Rates have doubled in the past four years.
“As soon as a new drug hits the market, it automatically becomes a benefit,” Smith said. “We like to cover everything that’s medically needed and that’s FDA approved, but people need to realize there’s a cost.
“We hold seminars to educate our population about the effects on cost with the new drugs. We encourage people to ask for generic drugs.”
Blue Cross’ Web site allows people to enter the name of a drug to find out if a generic substitute is available. The site also shows the cost difference.
“Our society is aging, and we want those new drugs to improve our quality of life,” Smith said. “But there’s a cost.”
D.H. Baker Dental Laboratories Inc. of Traverse City, with 52 employees, uses Blue Cross, but self insures for drug coverage because of the cost.
“We have a system,” said Phyllis Jessup, controller for the company. “Each person uses a certain amount for drug coverage and we pay the pharmacy.
“It’s less costly, even though that’s increasing, too.”
Doug Baker, president of the company, said his product prices have increased and he might have to start charging his employees a co-pay because of increases in health insurance rates.
“Our costs keep going up; it’s getting ridiculous,” he said. “It would be nice if someone could hold the insurance companies back from raising their prices.
“Everyone incurs the same type of cost and it seems like we don’t have a choice.”
SBAM and Blue Cross both hope for reform in early 2003 if an agreement isn’t reached this year between the two groups and Gov. John Engler.
“It’s not looking good for this year,” Cargill said. “We could end up with real bad legislation if the bills make it to the floor during the lame-duck session, so we don’t expect them to go until early next session.”
Engler’s position is that the bills will not work until Blue Cross reforms the board of directors and the small-group market that continues to lose money.
“Without basic reform, anything else we do won’t have an impact,” said Matt Resch, Engler’s deputy press secretary. “That market is losing money and it has a ripple effect down to families who aren’t getting health insurance.”
Smith said he knows of no action being taken by Blue Cross and doesn’t find the reform to the board of directors necessary.
The Legislature will reconvene after the Nov. 5 election and the session will end in December.
© 2002, Capital News Service, Michigan State University School of Journalism