Why Does Small Business Matter?
The Breaking Point
Why health care reform is crucial to small business
• Small Firms:
– Represent 99.7 percent of all employer firms
– Employ half of all private sector employees
– Create between 60 to 80 percent of all net new jobs
– Produce 13 to 14 times more patents per employee than large
firms
• The small business share of employment remains around 50 percent
• 78 percent of small businesses have fewer than 10 employees
• 61 percent of small businesses are micro-businesses with fewer than 4
employees
By: Todd O. McCracken, President
Annual Premium Increase Compared
Against Other Economic Indicators
2000 - 2006
Total Premium Increase Compared
Against Other Economic Indicators
2000 - 2006
100
16
90
87
14
13.9
80
12.9
12
73
70
11.2
10.9
60
10
59
9.2
50
8.2
8
7.7
43
40
6
30
25
11
10
0
0
2000
4
3
15
14
12
10
10
7
7
5
4
20
18
20
4
3.3
3.9
3.1
3
2.2
2.6
1.6
2
3.8
3.5
3.5
2.7
2.3
2
0
2001
2002
2003
He alth Ins ur ance Pr e m ium s
2004
Inflation
2005
2006
2000
Wor k e r 's Ear nings
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2000-2006
2001
2002
2003
He alth Ins urance Pr e m ium s
2004
Inflation
2005
2006
Work e r's Earnings
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2000-2006
Annual Premium Increase by
Employer Size
Comparison of Premium Increases
by Employer Size
18
18
16
14
12
10
8
6
4
2
0
16.5
16.6
15.5
16
14
12
13.2
12.5
11.8
10.5
10.2
9.8
10
8.9
8.8
7
8
6
4
2000
2001
2002
2003
2004
2005
2006
2
0
V ery Small B usines s es (3 to 24 W ork ers )
S mall Bus ines ses (3 to 199 W ork ers )
Large B usines s es (200+ W ork ers )
Very Small Businesses (3 to 24
Workers)
Small Businesses (3 to 199
Workers)
2001
2003
2005
Large Businesses (200+
Workers)
2006
Total
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2000-2006
*2000- 2003 data uses firm size of 3 to 9, 2004-2006 reports consolidated very small businesses to 3-24 workers
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2000-2006
*2001 and 2003 data uses firm size of 3 to 9, 2005 and 2006 reports did not distinguish between 3 and 24 employees.
1
Overall Percentage of Firms Offering
Health Benefits, 2000 - 2006
Percentage of Businesses Offering
Health Benefits by Firm Size
66
120%
65
99 % 99% 9 8% 98% 9 9% 98% 98%
100%
65
64
80%
63
63
63
57% 58 % 58% 55 %
60%
62
52%
62
4 7% 48%
61
61
40%
60
60
20%
59
59
0%
V ery S m all
B us ines s es (3 - 9
E m ploy ees )
2000
2001
2002
Large B us ines s
(200+ E m ploy ees )
58
57
56
2003
2004
2005
2000
2006
2001
2002
2003
2004
2005
2006
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2006; KPMG Survey of Employer-Sponsored Health Benefits, 1996.
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2006
Percentage of Firms Offering Health
Benefits, by Firm Size in 2006
120%
Percentage of Businesses Offering More than
One Health Plan Option by Firm Size
90
100%
87%
92%
98%
79
80
70
73%
80%
57
60
60%
50
48%
39
40
40%
30
20
20%
20
10
0%
3 to 9
10 to 24
25 to 49 50 to 199
200+
Firm Size by Num ber of Em ployees
0
Sm all Firm s (3 to 199
Wor k e r s )
200 - 999 Work e rs
1,000 to 4,999
Wor k e r s
5,000+ Work e rs
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2005
Percentage of Small Employers Considering
Changes to Employee Health Plans
Not considering any
changes in the next year
49%
Source: NSBA Member Survey, October 2005
Considering change in the
next year
51%
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2005
2
Expected Changes to Employee
Insurance Plans
50%
45%
Percentage of Employee Premium
Paid for by Employer
44%
41%
49% or less of
Premium
30%
40%
35%
30%
22%
25%
100% of Premium
30%
24%
20%
15%
15%
10%
3%
5%
Increasing
Employee Share
Reducing
Benefits
Switching to
Reducing
High Deductible Contributions to
Plan
HSA/FSA
Dropping
Coverage
O ther O ptions
100% of Premium
Source: NSBA Member Survey, October 2005
80% to 99% of Premium
50% to 80% of Premium
49% or less of Premium
Source: NSBA Member Survey, October 2005
Allowable State Variations Within a
Particular Plan
Employee Premium Cost-Sharing Trend
Small vs Large Business
30
$7,000
25
$6,000
Employee Share
80% to 99% of
Premium
19%
50% to 80% of
Premium
21%
0%
$5,000
20
$4,000
15
$3,000
10
$2,000
5
$1,000
0
AK AL AR AZ CA CO DE FL ID IL KS MA MD ME MI MN NC ND NH NJ NY OK SC SD TX VT WA WI WY
$0
2003
2004
2005
2006
2007
Large Employers
2008
2009
2010
Ratios 2.5 10.8 3.3
Source:Hewitt Associates, US Bureau of Labor Statistics
9.3 20.3 23.6 1.7
3
•
Individual Responsibility
•
Broad Reform of the Insurance Market
–
Association Health Plans (AHPs)
– Attempt to provide cost-cutting by allowing trade-associations to create a national pool for
their members under a new set of federal rules
–
–
• Would create adverse selection and segment the market due to AHP’s ability to skim off
the healthiest individuals.
–
–
Small Employer Health Benefit Plans (SEHPB)
– Patterned after federal employees’ health plan, SEHPBs would establish a federally-run
insurance pool for small businesses
• Would create adverse selection on part of the SEHPB due to a rich benefit package,
guarantee issue and government subsidies on the plan
•
7
2.3 4.2 2.5 8.2 8.1
2
3.5
2
1
14 2.5 21.3 27.4 1
4.9 20.5 27.3
NSBA Health Care Proposal
Why They Won’t Work
•
1.2 7.9
Source: National Association of Insurance Commissioners
Piecemeal Solutions:
•
4
1-99 Employees
Enzi Health Care Proposal
– Would allow for limited AHPs with state oversight and preempt certain states’ rating rules
• Best of all three initiatives, but doesn’t go far enough in creating broad reform and
enhancing consumer involvement
All individuals would be required to obtain coverage providing for the spreading of risk with all
individuals in the insurance pool.
Establishment of a federally-defined basic minimum package that is truly basic in nature
Actuairily-determined rate bands established within which insurance companies could price their
products
Insurance companies would operate under a guarantee issue system
States would retain oversight and authority over all plans under the federal framework
•
Provide Subsidies for Low- Income
•
Reshape Health Insurance Tax Incentives
•
Reduce Costs and Improve Quality
–
–
–
–
–
–
Individuals and families would receive federal financial assistance for health premiums, based upon
income
Tax parity for all purchase of health insurance, whether purchased through an employer or individually
Cap tax-preference on health expenditures at the premium level for the required package
Instituting increased consumerism requires ample information be available to consumers
Increased IT in health care through electronic medical records and procedures to both reduce errors and
increase efficiency
Pay-for-Performance based on actual health outcomes and standards established through evidence-based
indicators and protocols
3