As California goes, so goes the nation, according to an old axiom. But will optimism about relief from pending health insurance rate hikes for tens of thousands of small businesses in the Golden State spill into other states or be buoyed by the Patient Protection and Affordable Care Act (PPACA)?
The answer isn’t so cut and dried.
California State Insurance Commissioner Dave Jones recently announced that small businesses across the state will collectively begin saving $48 million after three insurers agreed to reduce pending rate hikes slated to take effect July 1 for groups with fewer than 50 employees.
They include Anthem Blue Cross, which withdrew a 2.5% rate hike, Blue Shield Life and Health Co., which provided a $1 million credit to 58,000 small businesses, and Aetna, which sliced in half its proposed 2.6% premium hike for 9,200 employers.
Jones, who identified lower health insurance costs as a top priority, said he has the power to review proposed health insurance rates, but cannot deny or modify any changes.
What about outside California? Many state regulators across the U.S. do not have the authority to review health insurance rates, explains Vanessa Sink, a Kansas City, Mo.-based communications specialist with the National Association of Insurance Commissioners.
Be that as it may, David Chase, the Sausalito, Calif.-based Small Business Majority’s California outreach director, believes that these developments show PPACA is working.
“The provision of the law that gives states the ability to review insurance company rates hikes and determine whether they’re excessive is allowing small business owners to keep their hard-earned money where it belongs: in their coffers,” he says. “For decades, small business owners have opened insurance bills with double and even triple-digit increases. Hopefully, that is truly a thing of the past.”
Robert Zirkelbach, a spokesman for America’s Health Insurance Plans in Washington, D.C., cautions that “focusing solely on premiums while ignoring the underlying cost of medical care will not make health care coverage more affordable for families and small businesses.”
He suggests that public policy address “all factors that drive premium increases, including soaring prices for medical services, the impact of younger and healthier people dropping coverage in a weak economy, and new benefit mandates and regulations.”
The growth in medical premiums from 2000 to 2010 tracked directly with the growth in benefits, according to national health expenditure data released by the U.S. Department of Health and Human Services. Zirkelbach says this trend “has been consistent for decades.”
Jason Andrew, founder of Stone Meadow Benefits & Insurance Associates in Redwood City, Calif., characterizes the modified rate hikes as small relative to overall rate increases and agrees with Zirkelbach that they do not remedy the problem of escalating costs.
He’s hopeful that a number of provisions in PPACA will begin to address costs. The trouble is that “a number of small businesses in California and elsewhere will not see rates come down anytime in the immediate future, and I think we would be steering them in the wrong direction by providing information that suggest they will.”
But having said that, Andrew expects some relief in California and elsewhere through small-business tax credits and goodwill from insurance carriers. With regard to the latter point, he cites Blue Shield of California as an example, applauding the carrier’s decision to cap profits as well as provide half of one month’s premium two times last year and 18% next month to a number of small groups. He says another “small step in the right direction” involves rebates stemming from the medical loss ratio requirement under PPACA.
Scott Hauge, president of Small Business California in San Francisco is hopeful about sustaining lower health care costs in California, which he says is ahead of most states in the implementation of insurance exchanges.
“If they can get this up and running and incorporate cost control measures like pay for performance, evidence-based medicine and integration of the delivery system, they could theoretically lower cost or at least bend the cost curve,” he believes, adding that any such development would take time.
Hauge cites “some very positive comments from small businesses in Massachusetts that have had an exchange for awhile,” though he realizes it’s different there from California. “I know most states are far behind and do not know what their exchanges will do in this area or even if they will be an active purchaser,” he adds.
Bruce Shutan, a former EBN managing editor, is a freelance writer based in Los Angeles.
