ISPA Position on

Health Insurance Reform

Issue:

Reducing healthcare costs and reforming medical health insurance. 

Importance:

Health insurance is an increasingly expensive employee benefit.  If left unchecked, this trend will impose higher costs on U.S. employers – particularly small and medium-size companies – and their employees. 

ISPA Position:

Employers should not be forced to carry the burden of spiraling healthcare costs alone.  A number of important legislative initiatives have been proposed to address these problems.  These include efforts to lower employer health insurance costs (through tax credits and association health plans), improve employee access to healthcare (through employee reimbursement accounts) and reduce medical costs (through malpractice liability reform and generic drug programs).

Background:

The following situation exists today because of high insurance costs:         

·         Only 49% of firms with fewer than 100 employees offer health coverage, compared to 98% of large firms. 

·         Only 34% of small firms that predominantly employ low-wage earners provide medical benefits.

·         Healthcare costs for companies with 10 or more employees increased on average by 14.7% in 2002.

Many employers are now faced with having to reduce the insurance coverage they offer their workers or eliminate this important employee benefit completely, both of which hurt employee morale and the employer’s ability to attract well-qualified job applicants.

ISPA Action:

ISPA supports a number of pending legislative initiatives to make health insurance and healthcare more affordable for employers and employees.  The following bills were introduced in the 109^th Congress (2005 and 2006)  Although there is not enough time left to pass them, ISPA will be working to advance similar ideas and legislation when the 110^th Congress begins in 2007:

Employer Tax Credits (S. 86; S. 53; H.R. 1936):  ISPA supports reducing the healthcare costs to industry through employer tax credits.  Increasing the tax benefit employers would receive from providing health insurance (as opposed to limiting the benefit to simply deducting the insurance premiums paid from taxable income) would expand the number of companies that can provide employee coverage and make coverage more affordable for employers that already offer this benefit.  However, it is important that these tax credits do not come with impractical strings attached.  For example, employers should be permitted to change or discontinue coverage at their discretion, and not be required to continue coverage for a set period.

Small Business Health Plans (H.R. 1936; H.R. 660; S. 1955):  Another initiative to reduce employer costs that ISPA supports would encourage trade associations to offer affordable health insurance for their membership.  This type of plan would especially help small- and medium-size companies that have fewer options and higher premium costs than larger companies.  The associations could purchase health coverage in bulk and have greater negotiating clout and improved administrative efficiency than the small- and medium-size companies.  The Congressional Budget Office has estimated that small companies purchasing health insurance in this manner could reduce premiums on average by 13%.  The House has passed H.R. 660, which applies to small businesses, defined as averaging 50 or fewer employees per year.   The Senate version, S. 1955 fell just short of the 60 votes needed to end a filibuster (55 to 43).   

More Liberal Employee Reimbursement Accounts (H.R. 2351; H.R. 2596; H.R. 1287):  Today, employers can allow their workers to set aside a portion of their pre-tax income in Flexible Spending and Medical Savings Accounts that can be used to reimburse them for their own out-of-pocket medical expenses.  No employer contribution to these accounts is required.  These accounts help employees lower their healthcare and medical costs.  IRS recently relaxed the rules for using these accounts to allow employees to be reimbursed for certain over-the-counter medicines.  ISPA supports this change and pending legislative efforts to make these accounts even more flexible, like allowing employees to “rollover” unused funds from one year to the next (as opposed to the current rule, that requires the employee to forfeit unused money at year end to the employer).  This would improve employees’ ability to reduce their healthcare costs. 

Medical Cost Containment Efforts (H.R. 2640):  Of course, medical insurance costs are rising rapidly largely because the cost of healthcare generally is rising.  Containing healthcare costs will help dampen medical insurance cost increases.  ISPA encourages Congress to address the rising costs of healthcare by placing caps on medical malpractice suits and expanding generic drug use through state pharmacy benefit assistance programs and shortening exclusive sales periods.