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Friday, Mar 29, 2024

What to Do About Rising Business Health Care Costs

What to Do About Rising Business Health Care Costs Commentary Guest Column: Cal Lockett The problem of rapidly rising health care costs has once again emerged as a national issue, with costs rising faster now than at any time in the past 10 years. The average cost of health care benefits for active employees rose 11.2 percent in 2001, compared to a general inflation rate of only 2.1 percent. Expectations for 2002 are equally glum: Overall, employers expect their costs to rise by an average of 12.7 percent; some (15 percent) expect to be hit with increases of 20 percent or more. Smaller employers have already had to take steps to shift more costs to their employees, most notably increasing individual deductibles by 100 percent or more. Although there was no comparable cost-shifting among large employers (500 or more employees) in 2001, it is clearly coming. Forty percent of large employers report they will require their employees to pay higher deductibles, co-pays or out-of-pocket maximums in 2002. Cost-shifting is a response, not a solution, and it creates its own set of problems. Especially in lower-income households, people are choosing to save money by scrimping on prescription drugs. Among the chronically ill population, people with higher co-pays are less likely to seek care for both minor and serious symptoms. Over the long term, such decisions often result in people becoming sicker and needing more (and often more expensive) treatments. The budget surpluses lawmakers were counting on to finance programs such as expanded coverage for the uninsured, Medicare reform and prescription drug coverage for seniors are virtually gone. In the face of dwindling funds, lawmakers at both the state and federal level are tempted to legislate costly mandates as a way to show progress in responding to these expensive health care issues. Mandates are politically appealing to legislators because they offer a way to “do” something at minimal government expense. However, they represent cost-shifting of the worst sort, generating even greater health care costs and forcing premium increases to businesses and workers alike. In addition to costly health care coverage mandates, two other legislative threats are looming, in which the potential to increase health care costs for California businesses is enormous: The liability provisions of the Patients’ Bill of Rights now before Congress and the liability provisions contained in the new California Assembly Bill 1600. Currently, employer-sponsored health care plans fall under the regulations of the Employee Retirement Income Security Act of 1974 (ERISA). Although ERISA subjects these plans to federal oversight, in the event of denied benefits, it also protects them from being sued, beyond reinstatement of those denied benefits, for emotional distress and punitive damages. Under the Patients’ Bill of Rights (PBOR) bill passed by the Senate last June, the liability provisions are a trial lawyer’s dream. Individuals may sue employers and/or health plans for medically reviewable decisions (for example, administrative) in federal court. In federal court, individuals would be eligible for unlimited economic and non-economic damages, and up to $5 million in punitive damages. In state courts, they would be eligible for unlimited damages, including punitive. Under the somewhat less burdensome House-passed version of PBOR, economic damages remained uncapped while non-economic and punitive damages are capped at $1.5 million each. Punitive damages are only available if a plan fails to comply with an external review decision. The deadline to introduce new legislation in California is the end of February, but already Assembly Bill 1600 is moving through the legislative process. AB 1600 is one of the most onerous, costly health care proposals in decades It seeks to shift health plan enforcement from the new California Department of Managed Health Care to the courts. The bill would allow physicians or any “interested party” to sue health plans over reimbursement rates in negotiated and signed contracts – or for nearly any matter regulated by the state’s new Department of Managed Health Care. This would be true even when plans are complying with DMHC requirements and providers have signed the very contract they wish to take to court. Proponents of AB 1600 admit their primary purpose is to force government review of contracted payment rates between providers and plans. Except for public utilities, state law never allows government regulation of payments between private entities and their subcontractors. Such court-ordered rate setting is unprecedented and bad for consumers because it is intended for just one purpose: to increase physician incomes, which will automatically push up the cost of health care – including premiums, deductibles and co-payments faced by businesses and consumers. As legislators get down to business in this election year, it is incumbent on both small business owners and corporate large group purchasers to be directly involved in the debate on health care: – Contact your trade and professional associations and ask them to monitor health care legislation, particularly proposals that clearly increase costs. – Get involved individually in the debate and let your voice be heard by your personal legislative representatives. There are many Web sites that facilitate such contact, including the nonpartisan, user-friendly www.vote-smart.org. The most immediate action issue is AB 1600. It is critically important that you contact your state assemblyperson as soon as possible to express your views and concerns regarding this onerous legislation. As you receive feedback on other health care proposals that will raise costs and threaten your ability to provide health benefits to your employees, take action again. Only through the concerted efforts of those who will bear the burden of spiraling costs can we hope to affect health care legislation that is reasonable and equitable. Cal Lockett is staff vice president of public affairs for WellPoint Health Networks Inc. He also serves on the VICA board of directors.

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