July, 2009

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Fixing health care for small business, self-employed and individuals — without tax money!

Thursday, July 30th, 2009

First of all, my solution for “reform” or actually trust-busting of healthcare for small businesses, self-employed and individuals does not involve tax money, subsidies, or much of anything else from government except mandating some rule changes. Most of these will be at the state level, though it would be necessary to make a small change in HIPAA at the Fed level.

The biggest single problem for all of us “little guys” (small businesses, self-employed and individuals) is the high cost to get into or maintain health insurance coverage, if we can get it at all. This is primarily because the insurance companies and groups, whether private for-profit or run by local or regional non-profit hospital groups, insist on dealing with small entities on a group-by-group basis. This means that a business with 10 employees that includes two or three with chronic conditions or a complicated pregnancy is going to pay a fortune in premiums.

In many cases, the employer simply cannot afford to include enough of the premium in their benefits to have anything left over to actually pay the employees. Since some employees may be able to get coverage through their spouse, the employer may be able to simply not offer healthcare and still attract enough workers. Nonetheless, many small businesses would like to be able to offer coverage to attract a larger pool of workers and perhaps to have group coverage for themselves as well.

This gets really tough if you are self-employed. Unless you are married with a spouse that has good coverage at their job, about the only option is an individual policy. Individual policies are not only very expensive, they also do not have to accept your pre-existing condition the way a group does under HIPAA.

It would seem that the obvious thing to do would be to organize some sort of group that various small businesses and self-employed people could join or affiliate  with so that the insurance companies had to deal with them as a group of say 500 people, rather than many small groups and individuals.  There would be one administrator for the insurance company to deal with and the risk would be spread out over a larger group, so that 2 or 3 people with chronic conditions no longer represented 25% of the group. This affiliation would also be a group under HIPAA, so those in it would have complete portability of their coverage from employer to employer, or  from employer to consultant/contractor.

Anyway, this grouping of lots of small businesses, self-employeds and free-lancers to get affordable health coverage sounds like a great idea, right? Not if you are an insurance company. This sounds like something that has to be prevented,  and that is exactly what has happened. Although it is possible to put together a group and negotiate with perhaps one carrier to give your group coverage based on some sort of membership or professional commonality, it is next to impossible to just get together a mixed bag of several dozen small businesses and free-lancers and define it as a group, then get coverage quotes and let your members make an annual choice on which of several competing levels of coverage they want. Why? Because it is highly profitable for insurers to demand that each employer be defined as a group and make the free-lancer/self-employed apply as individuals. This is especially profitable for them when dealing with self-employed people who usually have to buy individual policies because the insurer can exclude pre-existing conditions. If this were a group plan, the HIPAA rules would not allow them to exclude pre-existing conditions.

As more and more of us become free-lancers, consultants, self-employed, this is becoming a bigger and bigger issue and becoming more and more profitable for the insurers.

What needs to happen here is legislation to force the insurers to deal with independent groups on the same basis as large employers including full portability of coverage. If you have a group of 500 people, it really doesn’t matter whether you all work for the same firm or not as far as your likelihood of illness/disease is concerned, so why are the insurers able to insist that it does?

This is NOT a case of government meddling in private business. Ask anyone that knows me, I’m a raving Libertarian. What this is is getting both state and federal governments to STOP allowing the insurers to cherry-pick the group size and composition they choose to deal with and actually restore free enterprise.

Free enterprise is a wonderful thing when it actually is free. When it uses government to grant monopolies or let it play by “special rules” that no other business gets to play by, it is no longer free enterprise. This is the root problem of our health no-care system now. The insurers, drug-peddlers and various other health-industry lobbyists have so gummed up the works with “special rules” that is has no resemblance whatsoever to free enterprise.

The Democrat solution is take money from some to pay for the rest and the Republican solution is to keep telling us that the Democrats are trying to socialize healthcare, and preaching  status quo ante. Meanwhile both sides continue to rake in campaign cash from the healthcare industry and enjoy a gold-plated benefit plan that we are all paying for.

If small entities and the self-employed could get affordable coverage through groups or co-ops, the numbers of uninsured and underinsured would drop appreciably, without any tax money! Let’s try this before we throw out more $Billions.