The Commonwealth Fund reported last week that while employer-based coverage in the state had increased slightly (it was pretty high to begin with), workers at small businesses were having a tough time. The number of workers at small firms who said they paid premiums at or more than twice the state average increased significantly—8.6 percentage points— from fall 2006 to fall 2008. The percentage of employees at small firms reporting high out-of-pocket spending tripled over the same period. (That means most families spend 10 percent or more of their income on health care costs.) The reason, the study’s authors said, “reflects increasing health care costs in the state, which predate health reform.”
The former CEO of Harvard Pilgrim Health Care had a different take. This summer on the insurer’s blog, Charlie Baker, now running for governor, explained that premiums for individuals went down by about 25 percent while those for small businesses rose between two and three percent per year. Baker explained why:
Medical expenses of small employers, on average, were much lower than the medical expenses of individuals. That’s due—in large part—to the fact that in Massachusetts, small businesses, their employees and their families had much lower medical expenses than individuals and their families. It’s as simple as that.Baker pointed to another crack in the state’s reform. When the two markets merged, insurance companies could not apply exclusions for pre-existing conditions or waiting periods before coverage took effect for individuals buying on their own unless such restrictions also applied to employees of small businesses. That idea didn’t fly; stakeholders argued it would be unfair to small businesses. Baker wrote that everyone had hoped that healthy individuals would buy coverage rather than take the tax penalty, thus bringing in enough premiums from people who weren’t sick to offset the expenses of those who were.
That’s not happening, Baker reported. Residents are gaming the system—buying policies for a short period of time, using services, and then dropping them. This, of course, raises premiums for both individuals and employees of small businesses. When Baker looked further, he found what he called “astonishing results.” Between April 2008 and March 2009, about forty percent of the people who bought Harvard Pilgrim’s individual policies retained coverage for less than five months, running up an average of $2400 per person in monthly medical expenses. Baker said that was “roughly 600 percent higher than what we would have expected.”
What Baker discovered is a cautionary tale for members of Congress hoping to fashion a health reform bill based on the Massachusetts model, and one that needs to be reported in the media. If the press outside the state has focused at all on Massachusetts reform, it has reported the boilerplate—medical costs are too high, everyone must have insurance, there are small tax penalties for those who don’t have it, and studies by policy wonks that say all is well. But they’ve ignored the deeper stories like the one we’ve just described.
This summer, Kay Lazar at The Boston Globe found them and reported on efforts to fix the problem that has Jon Hurst so upset. Solutions range from creating a non-profit small business purchasing cooperative to allowing small business owners to reduce their upfront costs by shifting the burden and charging employees higher out-of-pocket prices. That proposal backed by insurers would also cap payments to hospitals and doctors at ten percent above what Medicare pays. Doctors and hospitals are furious at the prospect, Lazar reported. Ah—that balloon problem again!