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Lessons Learned the Hard Way

by Joe Sullivan

When one of Metro Pulse's staff writers was stricken last year with a pervasive infection, we had no idea how severe the consequences would be for him or for our small enterprise.

For several weeks his life hung in the balance in Vanderbilt Hospital's critical care unit, sustained only by dialysis, a respirator, and the replacement of two heart valves. Eventually, antibiotics and a relenting Mother Nature restored his kidney and lung function. With his heart supported by a pacemaker and blood-thinning medication, he was able to return to work after a four-month leave of absence.

Compared to his ordeal, the impact on Metro Pulse pales by comparison. But it's been a body blow all the same. When our health insurance plan came up for renewal at year end, the total monthly premium nearly doubled from $3,880 to $7,490, and we were told that we had the worst experience rating of any group covered by our carrier. Other carriers wanted no part of us, and we couldn't justify passing along the increase to our employees with whom the company had been splitting the premiums 50/50. In order to keep the cost to them affordable, the company absorbed most of the increase.

The resultant $3,000 increase in Metro Pulse's monthly expenses may not seem all that much to some readers. But for all that we've accomplished over our eight-year existence, Metro Pulse is still a small business that's been struggling to break even on revenues that have grown to a little over $1 million a year. A $36,000 annual health insurance hit will make it very difficult to reach that goal this year. And as painful as it is to contemplate, it's led us to weigh whether we should go the way of so many other small employers who've concluded that providing group health coverage for their workers is unaffordable.

Most of our people are healthy and young enough to obtain coverage on their own for a lot less than the doubled group rates that Metro Pulse is now paying. The company could make contributions toward their individual premiums and still achieve substantial savings.

The trouble is that this would leave individuals with health problems in a bind. Our beleaguered staff writer has had a recurrence of heart problems, and we also have a diabetic in our group. Under a 1996 federal law known as HIPPA, termination of our group plan would at least entitle them individually to insurance that covers their pre-existing conditions (which most individual polices exclude). But an insurer is entitled to jack up its rates on them to 500 percent over the standard charge. Assuming Metro Pulse's rates were standard before we got clobbered at year end, this could mean monthly premiums of more than $700 for our two "bad risks"—anything but affordable for individuals earning less than $30,000 a year. Moreover, anyone who developed a serious health problem in the future would face a similar plight.

Dwelling on Metro Pulse's difficulties is not intended to cry on anyone's shoulder but rather to cry out for health care reforms that will spare small employers generally from having to face them in the future. The criteria for a solution include:

* Protecting small employers and participants in their health plans from onerous rate increases based on the misfortune of a single participant. This could be accomplished if many small group plans could be amalgamated into a single large one, thus spreading an insurer's risk exposure. But present law precludes that, at least in Tennessee.

* Making health insurance mandatory, as automobile insurance is in many states (though not in Tennessee). People without health insurance are a menace to themselves and to society, as evidenced by recent data showing that a majority of all personal bankruptcies are caused by run-away medical bills incurred by the uninsured. Requiring insurance on the part of younger adults who are prone to believe they are invulnerable to catastrophic illness would also remove the incentive for them to stay out or drop out of group plans, leaving insurers and employers saddled with the older, higher risk population that remains covered.

* Making health coverage affordable to the entire population without making it a "gravy train" that encourages escalating use, especially of prescription drugs, without any out-of-pocket expense on the part of consumers. Health insurance tax credits for those with low to moderate income that are now gaining support in Congress would represent a meaningful step in the right direction but are far from the total solution.

* Requiring health insurers to offer the same rates to all employers would represent a more radical step since it's hard to expect insurers to book business that begets all-but-certain losses on the part of high-risk groups. However, the prospect of such a requirement could encourage insurers to get behind the formation of large-scale purchasing alliances that would be open to all comers at uniform rates.

Any meaningful steps toward universal coverage must be undertaken nationally rather than state-by-state. The experience with TennCare demonstrates that its laudable goal of providing coverage to the uninsurably ill can swamp a state with the cost of caring for an influx of such residents. Moreover, there needs to be a level playing field throughout the country for consumers, employers, insurers, and health care providers alike.

The Clinton Administration's botched attempt to construct a national health care system based on private insurance evidences the enormous complexity of the undertaking. But unless some means are found, then the exigencies of the need for universal coverage compel consideration of extending Medicare to the entire population.

At the time of Medicare's creation in 1964, it was vehemently opposed as "socialized medicine" by insurer and provider lobbies. But it's gone on to become a sacred cow. While providers may only get paid about 75 percent as much as they collect under typical commercial plans, that sure beats the much lower reimbursement rates under TennCare, not to mention the indigent care and bad debt losses that hospitals are incurring. Moreover, Medicare is not a pure "big government" solution. Blue Cross/Blue Shield administers the program in Tennessee, which is exactly the role it is now seeking to perform for TennCare.

The U.S. is now, disgracefully, the only advanced nation in the world without a national health care system. But as long as a systemic solution is forthcoming, better that it be driven by private sector dollars and decision-making than by higher taxes and bigger government bureaucracies.
 

May 4, 2000 * Vol. 10, No. 18
© 2000 Metro Pulse