A Constructive Conservative Approach on Health Coverage for Small Businesses Jeff Lemieux
June 21, 2004
Fear is the main impediment to expanding health coverage. Liberals fear conservative policies would shortchange public programs and wreck employer-based health insurance. In their worst nightmares, sick people wouldn't be able to get coverage at all. (For their part, conservatives fear liberal policies would foster a bureaucratized, government-run health system with price controls, shortages, limited innovation, and high taxes.)
A new report by the Heritage Foundation's Stuart Butler, entitled Reducing Uninsurance by Reforming Health Insurance in the Small-Business Sector, exhorts conservatives to improve employer-based coverage, not reject it. This is good practical advice, and it should help reduce the fear factor that sometimes accompanies conservative health ideology.
Conservative health policy is easy to caricature. It would replace the current employer-based health benefits system with individually purchased "catastrophic" health insurance and tax-free spending accounts for routine health needs. Right?
Well, yes and no. Yes, virtually all conservatives applaud the concept of high-deductible catastrophic coverage and Health Savings Accounts (HSAs). They believe this would make consumers more careful shoppers for health services, and would eventually restrain the growth of health costs.
But no, thoughtful conservatives also want to take advantage of the best features of employer-based health coverage, like convenient enrollment, workable risk aggregation, and consumer protections.
However, employer-based health insurance doesn't work very well for small businesses. The risk pools are just too small and unstable, and premiums can vary widely. Small business owners may not have the time or the skills to organize health benefits on behalf of their employees.
Heritage's new report implies that conservatives shouldn't downplay the number of uninsured or the larger problems of health coverage. Moreover, conservatives should work within the framework of employer-based coverage, recognizing its attributes and the fact that liberals (and many voters) will react in fear if conservative policies threaten to undermine it.
Butler encourages conservatives to keep their eyes on a core conservative value: individual choice of of health coverage. Improving the system under which small businesses purchase coverage would kill two birds with one stone: (1) expanding coverage, and (2) giving employees more control over which health plans or types of health coverage to use.
A key goal for centrist policymakers -- as well as conservatives and liberals -- should be to empower people to take more control of their health insurance, and their health.
By concentrating on health reforms in the "dysfunctional" small business market, Butler suggests that conservatives can further the goals of consumer choice and empowerment without scaring the daylights out of liberals.
Butler suggests three steps toward the needed reforms:
Step #1: Create a refundable tax credit for workers in small firms in order to eliminate the bias against employees choosing their own coverage and to subsidize those who need the most help.
Step #2: Create alternative pools for the employees of small firms--including plans offered through churches, unions, and other intermediaries, as well as through the FEHBP [Federal Employees Health Benefits Program]--so that these workers and their families can access a wide range of affordable plans.
Step #3: Make it easier for employees to sign up for insurance in the workplace--even when the employer does not sponsor insurance--by removing tax and regulatory obstacles.
For practical purposes, Step 2 should come first. Liberals typically have a knee-jerk reaction against refundable tax credits. They believe that many types of tax credit proposals -- including the Administration's plan -- would siphon off young and healthy workers from small business insurance plans, which could make the overall risk pooling problems worse, not better. They want to be sure people would have a good place to use their tax credits, and they don't trust the market for individual insurance.
First, we should create alternative, government-sponsored insurance pools for small firms. We can argue about whether those pools should be sponsored by states or the federal government. We can debate whether or not they should be privately run. We can figure out ways in which private associations (like churches, unions and trade groups) could join the government-sponsored pools to their mutual benefit. We can discuss which types of reinsurance or risk adjustment are best, how much flexibilty to give the states, and which types of subsidies would best get the new system off the ground.
Those aren't easy questions, but reasonable compromises should be readily achievable.
Then, with a sound purchasing infrastructure in place, we could move to Steps 3 and 1, offering enrollment and subsidization through small employers (even if they don't offer coverage directly), and adding a tax credit for low-income workers.
Hard work on small business pooling will convince many liberals that conservative proposals for health care tax credits are really designed to expand health coverage, not to switch people out of employer-based benefits into the market for individual coverage (where catastrophic coverage is increasingly the norm).
And bipartisanship is very important in health policy. Getting a significant participation and "buy-in" from both sides of the aisle would make any expansion of health coverage easier to enact and less contentious to implement.
Links:
Heritage Foundation Reducing Uninsurance by Reforming Health Insurance in the Small-Business Sector by Stuart Butler (June 17, 2004)
Centrists.Org Commentary: Cover the Uninsured? Not This Week (May 11, 2004)
Centrists.Org Understanding Health Coverage Policy in Washington -- The Borg vs. the Klingons (March 29, 2004)
Centrists.Org The Durbin-Lincoln Small Employers Health Benefits Program (SEHBP) (revised March 4, 2004)
