Healthy health reform

Neil Solomon

January 25, 1993|By Neil Solomon

NEWS reports said recently that New York State's small businesses face a heavy new burden in 1993 as the state's primary health insurer increases premium costs for employees by up to 22.5 percent.

The new rates affect 650,000 people, mostly employed in some 50,000 small businesses. Because many of these businesses are unable to absorb the higher costs and are reluctant to raise prices in competitive local markets, many small businesses operating on close margins are expected to cut or drop coverage for their employees. Others will insist that their workers pay all or part of the increases if they want to continue coverage.

This phenomenon is not unique to New York. Maryland faces the same problem. In addition to rising premium rates, small businesses are severely limited in the type of coverage they can offer. While the premiums may or may not be affordable, individuals or their immediate family members can face loss of coverage should they develop "expensive" or long-term illnesses.

Imagine working for a company with 10 employees. You pay a quarterly premium for family coverage. Your wife incurs an illness that costs the health insurance company $100,000 during the year. Because of this, the health carrier informs your employer of a $100,000 increase in the company's premium.

Your employer has several options. He can exclude you from the insurance plan, fire you so you don't have to be included in the plan, keep you in the health insurance program and increase everyone's premium by $10,000 or pick up the entire $100,000 increase -- which is highly unlikely.

Additionally, should you choose to change jobs, your new employer can exclude you from the new health plan, as your wife has a "pre-existing" condition.

With some 35 million Americans with no health-care coverage at all, it becomes increasingly imperative that we protect those working in small businesses from losing their health coverage.

Part of the problem has been with the health insurance industry itself. By becoming extremely selective -- that is, only taking on those individuals with little or no risk of health-related problems -- insurance companies have "skimmed" the best clients off, leaving those at risk to pay higher prices. Smaller groups are also a problem, as there are just not enough individuals to spread the cost fairly.

Reform is urgently needed. Many plans have been discussed. President Clinton has been told by his advisers that for this country to regain its economic stability, health-care costs must be brought under control and reform brought to the health insurance system.

In July, Gov. William Donald Schaefer formed the Health Care Reform Commission to review options available to Maryland. As its chairman, I have met many individuals and heard discussions of several plans. Many of them have overlapping principles; all are well intentioned.

What is needed is a plan that will provide universal coverage in a timely fashion, affordable premiums and quality services. The other part of the formula is to truly devote energies toward a health-care program that stresses prevention and tolerates no fraud or waste in its administration.

I hope the governor and legislature can agree to a viable plan for Maryland. What we are looking at now is health-insurance reform for small businesses with a "community rating system" and prohibition of "pre-existing" clauses. The community rating system would form a larger pool for small businesses and protect employees and their families from losing their health insurance just when they need it most -- in face of a major illness.

This can be accomplished in gradual steps -- toward the ultimate health-care reform, universal coverage.

Neil Solomon, former Maryland health secretary, is chairman of the Governor's Drug & Alcohol Abuse Commission.

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