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Insuring small business: A challenge and an opportunity for healthcare professionals

April 2014
Jenna Gregory, Director of Business Development, Greater Houston Physicians Medical Association

As numerous entities and government officials act to address widespread confusion regarding the upcoming premium rating requirements, as mandated by the Affordable Care Act (ACA), physicians are discovering that this new legislation has a large impact on medical practices as well, often in ways they did not predict or anticipate.

In March 2010, President Obama triumphantly quoted a report issued by the Business Roundtable, which predicted that the ACA would save small businesses up to $3,000 per employee. However, the Center for Medicare and Medicaid Services recently released a controversial new report outlining that, in fact, two-thirds of the country’s small businesses will experience increasing healthcare costs. These rising costs are a direct result of the Affordable Care Act (ACA) legislation, which has led many to question the real impact of the ACA for small businesses across America.

As reported by The Wall Street Journal, approximately 11 million small business employees nationwide, including doctors and physician groups, will face an overall increase in healthcare premiums due to the community-rating provisions of the ACA. This has led many to predict that employers will be actively exploring more cost effective ways to provide the required level of healthcare services for their employees.

Although small businesses with fewer than 50 employees are not legally required to offer group healthcare plans to their workers, it is worth noting that one small business is not the same as the next. In fact, the nature of a business’ operations will directly affect the extent of the impact of these recent healthcare reforms.

To provide an example, small businesses that employ part-time and unskilled labor, may not be hugely affected by increasing premiums. These uninsured employees can simply apply for coverage through the government’s Small Business Health Options Plan (SHOP) marketplace, thereby ensuring that the minimum essential level of coverage is reached.

Conversely, for businesses required to employ highly educated or specialized talent, such as lawyers, engineers and medical professionals, insurance coverage is an important part of the employment process and expected employment package, and therefore an important issue.

Whether a medical practice has 50 fulltime equivalent employees or less, most will offer some type of health insurance to their professional and administrative staff members. Because many traditional insurance programs require a minimum of 50 fulltime employees for a company to be eligible for a plan, SHOP is the logical insurance choice for companies with less than 50 fulltime employees.

Unfortunately, many small business employees have been left exposed- vulnerable, and uninsured, due to the constant technical problems plaguing the healthcare. gov registration website over the last six months. The website crashed from the first day it was launched on October 1, 2013, these issues persisted until the website went down on the last day for SHOP registration on March 31, 2014.

The result of these technical glitches is not yet clear, although Robert Laszewski of Health Policy Associates estimates that only one in four subsidy-eligible people have signed up for health insurance as of April 1, 2014. Those who are not yet registered for health insurance now face a long wait until the end of the year, when the next six-month registration window is will open.

Furthermore, it has also become apparent that small businesses attempting to gain healthcare coverage for their employees are inherently disadvantaged when compared to big businesses. They are unable to offer the same scale of healthcare coverage or premiums, and there is a great deal more paperwork involved as well.

The underlying reason for this inequitable treatment is unfortunately logical: the concept of insurance is simply a numbers game, in which volume users are more likely to be impacted by the incidence of catastrophic illness by group members. Smaller employer groups run the risk of having their allocation wiped out by a small number of medical expenses—or even a single, disastrous medical expense—and must pay a premium as a consequence.

Recognizing the need in the small business community, some multi-specialty physician groups have begun to explore ways of accessing more affordable group coverage for their employees. By forming an alliance with several small businesses, these groups are then able to access the ‘big business” healthcare benefits from insurance companies, while expanding their market share in the process.

It is also worth looking closer at what the government SHOP program exactly covers, and how this compares to traditional health insurance. Unfortunately, it is anticipated the federal government SHOP program has marked a transition from highly personalized and customizable health insurance options, to a more uniform, one-size-fits-all approach. The SHOP program and its rate structure is predicted to be universally applied to all participants, regardless of age, gender or demographics, which will undeniably result in many employees paying for coverage that they will never need.

The murky world of health insurance is further complicated by the fact that insurance requirements can differ widely between states. In Texas for example, insurance companies require approximately 70 to 80 percent of a small employer’s eligible employees to participate in the health plan. When considering the fact that small businesses offer health plans to nearly 17 million employees nationwide, it is obvious that the requirement for sufficient health insurance coverage is now—not later.

As an employee with first-hand experience, observes, “Currently the majority of medical funding spent seems to be going to hospitals and insurance companies. In order to reduce the cost of providing healthcare to our communities, we need to reduce expenditure, and cut out any idle middlemen. This way, everyone wins, as the doctors receive an improved income, and our patients receive a good standard of care, without intrusion from middlemen.”

Dr. Robertson is member of a Houston area multi-specialty group, and is describing a concept that is increasingly being explored by small businesses across the country. By working together, small physician practices are able to provide employees with more affordable medical coverage, essentially a win-win situation for all involved. The physician and support staff employees are themselves provided with quality healthcare at a reasonable cost. Furthermore, by combining networks, the physicians have the opportunity to expand their base of patients.

Unsurprisingly, this type of program is not without challenges. Although many multi-specialty groups offer a limited range of services as required by a ‘traditional’ health insurance program, these groups are increasingly required to offer diagnostic services in addition to primary care and specialty services, to accurately diagnose patients.

In such cases, the multi-specialty physicians group would likely contract additional professional services to provide whatever voids exist in its operation, thus creating new revenue-generating opportunities for other physicians and specialized service providers.

The benefits of a hyper-local insurance plan are obvious: by focusing on a specific geographic area, patients are able to access convenient clinics close to their home or workplace. These centers can provide coverage, billing and administrative services, thereby removing the need for a patient to deal with a large corporate hierarchy.

The localized plan could also offer greater flexibility and economic advantages to small business companies and their employees. Although large insurance companies adjust rates based on actuarial tables, covering a large spectrum of clients to spread out their risk, localized insurance coverage and rates are able to be customized to the demographics and requirements of the company itself.

A multi-disciplined, physician-organized insurance plan has the potential to offer a more attractive rate structure to local employers, and be more likely to provide personalized service without the requirement to follow policies mandated by hospitals or insurance companies.

By comparison, these tailored, hyper-localized healthcare plans are not options nationwide insurance companies, or indeed the federal government, are in a position to provide.

In short, the United States healthcare industry is currently undergoing an unprecedented transformation. Although coverage is mandated from the government, affordable coverage for relevant healthcare remains elusive for many. The issue is not confined to the political world, as business owners, large and small, will experience first-hand how this flawed SHOP healthcare system affects their employees.

For small businesses nationwide, and physicians and multi-specialty groups in particular, this is a time to be proactive— not wait to see what comes next from Washington.