By Linda Schwimmer
As an insurance broker, Staci Grant used to feel like a hero when she visited small businesses to discuss health insurance options for employees. She talked to owners of hair salons, bakeries, auto body shops, law firms, physician offices, small non-profit organizations, and others.
“The owners of small businesses want to attract and retain their employees. But they also know that providing health insurance is the right thing to do,” says Grant, the vice president of the Benefits Division of Henry O. Baker Insurance Group in Dover.
In recent years, though, Grant says she visits these same businesses “with my tail between my legs.” Premiums have been jumping substantially, often by double digits. This year, she presented health insurance plans to small businesses that included a 13% increase in the cost of premiums. At the same time, cost-sharing for employees went up.
“People tell me, ‘So I’m paying more and getting less?’ I can’t disagree,” says Grant, who tries her best to find her clients their best options.
At the New Jersey Health Care Quality Institute, where I am president and CEO, we hear this story all the time. The market for small businesses in New Jersey to purchase health insurance is crumbling.
In 2005, the state-regulated health insurance market provided health coverage to more than 1 million people. Today, that number has spiraled down to less than 287,000 people.
Some people left the small business health insurance market to obtain health insurance through New Jersey’s Medicaid expansion, and others to the individual market through the Affordable Care Act. I applauded the efforts to strengthen these health insurance options, and the Quality Institute contributed to their creation.
But with the focus on Medicaid and the ACA, health insurance for small businesses was ignored. Prices started rising dramatically. As a result, some businesses just stopped offering health insurance to their employees. And other businesses turned to alternative options not regulated by the state and lack the consumer protections of the small group market.
Here’s some background: The state regulates the small-group health insurance market, where insurers cannot discriminate because of preexisting conditions or gender. But they compete against unregulated markets that are not prevented from discriminating against people who may have higher health care costs because of their age or gender, the possibility of pregnancy, say, or previous use of health care. These alternative markets can “cherry pick” which small businesses they want to insure.
What does that mean? Businesses with employees with potentially higher health care costs will likely end up in the regulated health insurance market, where they can’t be discriminated against. If you understand health insurance, then you know that’s a recipe for a downward spiraling insurance market. For a healthy market, you want everyone in the pool — young as well as old, healthy people as well as those with preexisting conditions, men as well as women. You can’t pull the healthiest or least costly people out of an insurance market and expect it to survive.
State legislators and regulators must act. The state has not updated regulations in this market for more than a decade, even as the rest of the health care industry and laws have substantially changed.
At the Quality Institute, we have long studied this market and with input from business, insurance and health policy experts, we created a report with nine recommendations to strengthen — maybe save is the better word — the small group market.
These recommendations include modernizing regulations so insurers in the small group market can better compete against the alternative market; creating state-based tax credits to small employers; updating plan requirements so they are more like those in the ACA market; and more. One recommendation is to enable insurers in this market to create closed drug formularies so they can negotiate for better drug prices. New Jersey is the only state that prohibits closed formularies in its small group market, and it makes our insurance more expensive. A closed formulary may limit what drugs are automatically covered.
There are more than 800,000 small businesses and organizations in New Jersey. These employers are a critical part of our economy. The state must act early in 2023 to influence the plans that will be sold in 2024. Two bills that address these issues (S3480 and S2824) just passed the Senate Commerce Committee and must be supported by the entire state legislature. The window is a small one to help struggling small businesses. State legislators and regulators must get moving now.
Linda Schwimmer is president and CEO of the New Jersey Health Care Quality Institute. The Quality Institute’s mission is to improve the safety, quality, and affordability of health care.
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