Clay County Economic Development Council: information and development assistance

Official Bill Summary on Missouri's Web site

New Missouri Health Law Helps Small Businesses

Summary of HB818 relating to the Portability and Accessibility of Health Insurance
Rep. Doug Ervin

Consider that nearly 98% of all firms in Missouri are small businesses employing over half of all employees in the state – and this is also where two-thirds to three-quarters of all new jobs are created, yet less than half of Missouri small businesses do not offer coverage for their employees, whereas 96% of all businesses with more than 50 employees do.

We are also aware that approximately half of Missouri’s uninsured work for small businesses.

Also consider that up to 40% of workers who get their health insurance through their employer never advance their career by going to another company, they never start a small business, or engage in an entrepreneurial activity, because they are afraid of losing their health insurance.

Our current health care delivery model is extensively regulated with a substantial reliance on third-party payment systems that distort incentives coupled with the lack of transparency in prices and quality measures limiting the effectiveness of competition. Add in the fact that societal attitudes towards health care are different from other goods and service sectors and you have an environment that is difficult to transform.

The key components of such a paradigm shift will embrace the market and seek to improve it through ownership and transparency. Ownership is only possible when the market distortions are leveled for consumers in the marketplace. It will also require consumers to “come to grips” with the public consequences of their private actions. In the treatment of health insurance tax equity and portability must be addressed.

The proposal begins to fundamentally change our paradigm from an employer-sponsored health insurance model to an ownership model for the purposes of health insurance in the small group market.

We already enjoy ownership of our car, life, and homeowners insurance. They are not connected to the workplace and they follow us from job to job. Our health insurance should not be connected or dependent upon our place of employment.

This ownership of health insurance is possible when we have a market and regulatory environment that promotes the portability of health insurance, i.e. the ability to “take it with you” from job to job, and tax equity – the ability to leverage the federal and state tax codes for all consumers in the health insurance market.

This new ownership approach is a way to reorient the state’s health care policy toward the objectives of the individual and away from the employer, insurers, providers, and government.

It provides an alternative for small employers who would rather make defined-contributions to employees versus the traditional small group plan offerings and it allows individuals who own an individual policy to “take it with them” from job to job.

Under this approach,

All employees working for small businesses in Missouri will now have the same pre-tax payment advantages as those working for large companies.
Employees are given the ability to shop the market for the health insurance plan that best fits the needs of their families while promoting competition among plans.
Under this plan, employees will enjoy the promise of continuity in coverage.
And they will be able to choose their doctor and hospital networks providing for the continuity of care.
And they will own their health insurance and be able to take it with them if they choose to move from job to another.

And for the employers:

Small employers can opt to make defined-contributions to employees versus purchasing a traditional small group plan.
This results in lower administrative costs and better predictability of future costs for the small employer and it effectively gets them out of the health insurance business and back to their core business.
The small employer may also see higher satisfaction from their employees as they choose the plans that best fit their needs.

This approach allows small employers to assist their employees in purchasing and owning the health insurance plan that best fits the needs of the employee and it levels the playing field across all employers – large and small – giving all employees the same federal and state tax advantages for the purchase of health insurance.

It also requires us to bring the Missouri Health Insurance Pool, or MHIP, into HIPAA compliance resulting in a lower threshold for one to be considered “uninsurable” resulting in an affordable option as the carrier of last resort.

Current MHIP eligibility is allowed for individuals:

1.      Who were turned down for individual health insurance or HMO coverage within the past six months because of medical condition or health history.
2.      Who were offered individual health insurance or HMO coverage within the past six months at a premium that exceeded 300% of the standard rate for individual coverage.
3.      Who was previously covered under another state's medical high risk pool and applies for MHIP coverage within thirty days of becoming a Missouri resident.
4.      Who was previously covered under an employer's group health plan under COBRA but attained the maximum coverage period.
5.      Who was involuntarily terminated from prior health coverage for any reason. An example would be if an insurance carrier chose to withdraw from the Missouri health insurance market.

NEW MHIP eligibility:

1. An individual is rejected by at least two insurers.
2. An individual is refused coverage with a rate in excess of the standard plan rate.
3. A federally defined eligible individual who has not experienced a significant break in coverage.
4. A trade act eligible individual.
5. Each resident dependent of a person who eligible for the high risk pool.
6. Any person whose health insurance coverage was involuntarily terminated and who has not had a signification break in coverage.
7. Any person whose rates have increased and now exceed 150% or more of the standard rate.

The premiums charged by the MHIP under current statute range from 150% to 200% of the market rate with the average being about 170% of market.

Under this proposal individuals would be eligible if the individual health insurance premium or HMO coverage offered within the last six months exceeds 150% of the market rate. The premiums charged would be lowered from a range of 150% to 200% of market to 125% to 135% of market.

Basic Small Business numbers:
97.8% of all firms in Missouri are considered small businesses.
Slightly over 1⁄2 of all employed Missourians work for small businesses.
2/3 to 3⁄4 of all new jobs are created by small businesses.
2006 SBA Office of Advocacy

How many small businesses offer health insurance in Missouri?
Missouri Workers in Small Firms: Demographics, Medical Risk, and Family Income - Mathematica Policy Research (MO Consolidated Small Business Employer Buy-In)
69% do not offer insurance.
There are more uninsured workers in firms 11-50 than 1-10.
96% of firms > 50 employees offer coverage.

Employee attitudes regarding employer-based coverage:
· fewer than 43% of ESI covered are satisfied with their current health plan
· fewer than half (48%) trust their employer to design a health plan that will meet their needs
· 47% believe there are better alternatives at the same price
· 39% prefer fixed dollar contributions for the purchase of health insurance
Watson Wyatt Worldwide. Maximizing the Return on Health Benefits: 2001 Report on Best Practices in Health Care Vendor Management. Washington: 2001.

People with Private Health Insurance Coverage:
• People Covered by Private Insurance 4,080,000
• 20th in % of residents covered by private insurance
• 12% Uninsured ranking 18th nationally
• 64% are self-insured
• 36% are fully-insured
• Percent of Employers Offering Health Insurance:
• 96% of large employers
• 42% of small employers
• 21st in % of employers offering health insurance
• Average Annual Health Insurance Premiums:
• Individual Market Single $2,299
• Individual Market Family $3,985
• Small Group Market Single $3,504
• Small Group Market Family $9,180
Individual coverage on average is $100/month less than small group coverage for a single covered life. Individual family coverage on average is $430/month less than small group coverage for an employee with dependents.
Source: Health Insurance: Overview and Economic Impact the States, December 2006, America’s Health Insurance Plans (AHIP)

Health Insurance Offer Rates (by firm size):
< 11 25.8%
11 – 50 70.4%
51 – 100 88.8%
> 100 90.5%
Source: Missouri Health Insurance Coverage and Access Survey, 2004, DHSS.

Missouri’s Uninsured Rates (by FPL):
FPL <= 100% 14.3%
FPL 101% - 133% 15.7%
FPL 134% - 150% 20.9%
FPL 151% - 200% 12.4%
FPL 201% - 250% 9%
FPL 251% - 300% 7.8%
FPL > 300% 3.6%
Source: Missouri Health Insurance Coverage and Access Survey, 2004, DHSS.
Missouri’s Uninsured Rates (by age):
0 – 5 2.6%
6 – 18 3.4%
19 – 24 20.1%
25 – 34 13.6%
35 – 54 10.9%
55 – 64 9.4%
65+ 0.3%
Source: Missouri Health Insurance Coverage and Access Survey, 2004, DHSS.

Work Status of Individual and Families Who are Uninsured:
No Workers 19%
Part-time Workers 13%
1 or more Full-time Workers 69%