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Richard T. Moore and Harriett L. Stanley
The healthcare squeeze on small businesses
IN OUR CURRENT economic crisis, rising healthcare costs have fallen particularly hard on small businesses and their employees. But working with employers and health plans, we have come up with a proposal to provide significant and immediate relief to the roughly 800,000 people who get coverage through a small employer or purchase it on their own.
Called the Affordable Health Plan, the proposal is designed for small businesses and individuals, and could include benefits equivalent to those offered through the Health Connector’s Commonwealth Choice Bronze package and could cut premiums by as much as 22 percent.
The median monthly premium for family coverage through a small business is more than $1,000. Reducing the premium by 22 percent could save $220 a month or over $2,600 a year. Cutting the premium by 22 percent for the lowest-priced Bronze package for a family of four, with two 40-year-old parents and two children living in Boston, could save $175 per month or $2,100 a year. If passed quickly, the savings could be achieved by next April when most small businesses renew coverage.
It is a simple solution to a problem based on the fact that 90 cents of every insurance premium dollar goes to medical services such as doctor visits, prescription drugs, and hospital stays. In Massachusetts, healthcare spending is a third higher than the national average - or $11,100 per person.
Under the proposal, healthcare providers and health insurers could be required to limit their costs to help small businesses and individuals. The bill could cap reimbursements to providers at no more than 110 percent of the rate paid to providers by the federal Medicare program, while limiting insurer surpluses on all products sold to small businesses and individuals to no more than 2 percent.
In short, the proposal forces providers and insurers to share responsibility for holding down healthcare costs.
The proposal could also help to reduce the wide variation in reimbursement rates among providers and also improve comparison shopping for consumers, who could focus on quality and service knowing that the cost could be the same, regardless of provider.
This is not a perfect solution. It does not, for example, address the overutilization of services that is responsible in part for ever-increasing medical costs. A state panel is in the process of developing a long-term fix to reform the healthcare payment system. However, the recommendations may take up to five years to implement.
Small businesses can’t wait that long.
Rising healthcare costs are a major barrier to economic growth. Health insurance is typically the second or third largest employer expense, and the continued increase in the cost of healthcare takes away resources small businesses can use to hire more workers, fund capital expenditures, and make other investments that strengthen our economy.
Small businesses are the engine of the state’s economy. The Affordable Health Plan could give them some much-needed relief in addressing the economic challenges confronting them.
State Senator Richard T. Moore and state Representative Harriett L. Stanley are the co-chairs of the Legislature’s Joint Committee on Health Care Financing. 
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