by Janet Trautwein
The Obama Administration recently announced that it would delay until 2015 the health reform law's "employer mandate," which will require all companies with at least 50 full-time employees to offer health insurance or pay a fine.
The delay represents a big help to large firms. Now it's time for the administration to throw a similar lifeline to small businesses — by lifting the law's cap on annual deductibles. Doing so would make insurance more affordable for smaller firms — and thereby help the White House meet its goal of expanding access to coverage.
As it stands, small companies will not be allowed to offer health plans with annual deductibles higher than $2,000 for an individual and $4,000 for a family starting next year. The intent is to ensure that patients get more comprehensive coverage — and to limit their out-of pocket expenses.
But the lower the deductible, the higher the premium — and vice versa. So these new rules capping deductibles will force premiums for many policies up.
Only one-third of small firms currently provide coverage that meets the new standard. Consequently, some two-thirds of small businesses will have to switch to policies with higher premiums, bigger co-pays, or fewer benefits.
If the premiums on those new policies continue to go up, small employers may drop coverage altogether.
Worse, this cost-inflating cap on deductibles applies just to small businesses — not individuals or large employers.
Small businesses already pay about 18 percent more than their larger counterparts for comparable health coverage. The deductible cap only exacerbates their competitive disadvantage.
So, it's no surprise that 41 percent of small businesses say that the Affordable Care Act has caused them to freeze hiring. A quarter are considering eliminating coverage for their employees. And nearly one-fifth of small employers have let workers go because of the health reform law.
High-deductible policies can help reverse those trends. They've proven extremely effective at reducing healthcare costs while simultaneously protecting individuals and families from financial ruin.
According to a study from the American Association of Actuaries, high-deductible plans deliver overall savings of 12 to 20 percent in the first year, compared to more conventional PPO plans. After that, high-deductible plans' annual costs can run 3 percent to 5 percent lower than those of PPOs.
In a study of more than 800,000 Americans families, the RAND Corporation found that health spending declined 14 percent when a family shifted from a traditional plan to a high-deductible plan.
And even though patients with high-deductible policies shoulder more financial responsibility for their care, they're actually more likely to seek preventive care. One study of 2.3 million patients found that those with high-deductible plans were more likely to receive screenings for cervical, colorectal, and prostate cancer than those with PPO plans. Diabetic patients covered by high-deductible policies were also better about monitoring their blood sugar and cholesterol.
If the Affordable Care Act's deductible caps were removed, enrollment in "bronze" small group plans —those with the lowest level of benefits, equivalent to 60 percent of an average person's health costs — would be 17 percent higher than if the cap were to remain in place.
Federal regulators have already set the stage for its repeal. For the next three years, they'll allow the deductibles for small employers' health plans to exceed the cap if there's no other reasonable way to deliver the "bronze" level of benefits and adhere to the law's affordability guidelines.
Congress should take the regulators' action one step further — and scrap the cap on deductibles permanently. Doing so would ensure that health reform meets its stated goal of making health care more affordable and more accessible for average Americans.
—Janet Trautwein is CEO of the National Association of Health Underwriters.