Formula for success | Sound business principles underlie national health care reform
Do your homework. Deliver a quality product or service. Control costs. Do well by your employees and they’ll do well by you. This basic formula for business success is hard to dispute. It stresses four core principles that characterize many successful businesses and entrepreneurs.
Of course, the formula is not always as simple as it seems. What happens when skyrocketing health premiums undermine efforts to control costs and do well by employees? With a seemingly endless cycle of double-digit percent health insurance premium increases and benefit cuts for those still lucky enough to have coverage, federal health reform was long overdue.
With the Patient Protection and Affordable Care Act now the law of the land, how will it help break this pattern? The new law encourages businesses, insurers, health care providers and government agencies to apply similar success principles to promote quality, affordable health care for all.
Do your homework
Health reform has some immediate benefits for businesses and employees alike. Tax credits for businesses with fewer than 25 full-time employees can potentially offset up to 35% of employer health insurance contributions through 2013, and up to 50% for two additional years starting in 2014. A similar provision applies to nonprofit organizations. Large companies that provide health benefits for early retirees can offset some of their costs through a temporary reinsurance program.
Next year, grants are available to small businesses that provide wellness programs. While not every business can take advantage of these opportunities, there are real, immediate benefits for those that can. Even those who can’t still have plenty of reasons to engage in Maine’s reform implementation process.
Deliver a quality product or service
Insurance market reforms in the new law require insurance companies to compete based on their ability to deliver a quality product, not their ability to discriminate against particular individuals or groups. Businesses and individuals in rural areas can take solace in the fact that their premiums will be more in line with those of their counterparts in other locations. Similarly, beginning in 2014, insurers can no longer use factors such as individual health status and pre-existing conditions to determine premiums or to deny coverage.
Finally, the laws holds insurers accountable for spending at least 85 cents on every premium dollar paid on health care costs. We should be proud Maine is ahead of the curve on most of these issues and recognize that we have already borne the costs associated with their implementation, putting us at a competitive advantage over states.
Control costs
Approximately 106,000 Maine employers and employees obtain insurance through the small group market; another 40,000 Mainers get coverage on the individual market. Merging these two markets to pool risk over a broader population may reduce costs and exact greater accountability from insurance companies. Combined with the requirement that everyone has some form of affordable health insurance, reform will reverse the trend of younger, healthier individuals leaving the risk pool and help stabilize the insurance market.
Health insurance exchanges will save time and money when comparing and purchasing policies. Imagine being able to see all the options in one place online. For small businesses without a formal HR department, this is huge. As an added bonus, members of Congress will have to buy their insurance through their home state exchanges, meaning they’ll keep a keen eye on their development and product offerings.
These benefits will take us only so far; addressing the underlying factors that drive health care costs is the greater imperative. Based on new research, policymakers and health care providers are working to reduce inefficiency and subpar results. Stakeholders including policymakers, consumer advocates, insurance companies, businesses and health care providers have also undertaken pilot efforts to change the way we pay for health care. The current fee-for-service payment system offers few rewards for avoiding more costly interventions down the road or demonstrating greater effectiveness managing chronic health conditions — a key cost driver in our health system.
Do well by your employees
All businesses owe it to their employees to participate in Maine’s implementation of health reform. While various industry groups focus on the “employer mandate” — a penalty beginning in 2014 for companies with more than 50 employees who don’t offer health insurance — based on the 2008 Medical Expenditure Panel Survey this provision will apply to less than 0.4% of Maine firms with at least 50 employees.
Of greater concern is how we as a state mobilize to take advantage of the benefits reform offers to businesses and individuals alike. Our next governor will play a significant role in determining whether Maine leverages existing initiatives and capacity to greater effect or steps backward in our efforts to provide affordable, quality care for all. Applying the basic formula for business success, Maine can keep the ball rolling.
Garrett Martin is associate director of the Maine Center for Economic Policy. He can be reached at gmartin@mecep.org. Read more Public Engagement.
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