Nancy Ann-DeParle Speaks With AllBusiness.com About Health Insurance Reform

Mr. Keith Girard: Hi, I'm Keith Girard. I'm a senior correspondent with allbusiness.com covering the small business
space, and we're here today to talk about small business and healthcare reform. And
I know that healthcare and small business have been a flash point in the debate so far,
so I was hoping you'd kind of tell us exactly how this will now benefit small businesses
specifically.
Director Nancy Ann-DeParle: Sure, Keith. First, thanks for hosting this.
We've been very anxious to try to reach out to a lot of small businesses around the country,
because we know for one thing they are working hard, making payroll and don't have time to
come to meetings in Washington. We're hoping that they could hear this today, listen in,
watch this, and learn more, and actually go to our web site as well, which is www.healthreform.gov,
to learn more about how health reform will help small businesses. So, I'm the Director
of the Office of Health Reform here at the White House, and with me is Mark Duggan, who
is a Senior Economist at the Counsel of Economic Advisers and who does a lot of our work around
small business. So, I think I would start off by saying first, we know that small businesses
are worried and they have every reason to be. The status quo when it comes to health
insurance is really not working for small business. We know that about a quarter of
the uninsured, around 11 million people, are employees of firms with fewer than 25 workers.
We know that they are finding it harder and harder to offer coverage because of rising
costs. We get a lot of letters from small businesses who say that. The percentage of
firms employing less than 10 workers declined from 57% to 46%. We know that is out there.
We know that small businesses pay about 20% more for health insurance than big employers
do, and we know that an employee of a small business is about 50% more likely to lose
their job base coverage than an employee of a large business. So, with our health insurance
reform, what we want to do is try to lower costs for small business, and we believe that
the bills that congress is considering right now will do that. And how do they do that?
Well, first of all, small businesses will have access to what we are calling an exchange,
which is really just a way of saying that we're going to pull small businesses together
and individuals together who right now are out in the market trying on their own to buy
insurance, going from broker to broker. We know how hard that is, and this pool will
help increase access to more choices for them and lower their administrative costs, because
some of them right now tell me they have to have a full-time person just trying to call
brokers and keep up with all that. So they'll have an easier way of purchasing. And we believe
that the estimates we've seen is that some small businesses could save as much as 25%
on premiums when this thing is fully phased in. So we think that will be a big help. Most
small businesses would be exempt from any requirement that they would, that they participate
in this. So, because of their size and relatively small payrolls, they won't have a requirement
to participate, but those who do and who want to offer, we think, should get lower costs.
We think they'll have more access to more choices, and they'll also have access to some
tax credits to help them afford it. So, that in a nutshell is what we're trying to do.
Mr. Keith Girard: One thing we did at All Business was I know
small businesses have been clamouring for details, so we went out and put together some
case studies, and I think we forwarded them to you. And it would be great if you could
kind of address some of these case studies and answer some of the individual concerns
that have been raised for small firms.
Directory Nancy Ann-DeParle: Yes. And we really appreciated your doing
that, because we do find when we talk to the trade association heads or whoever, they say,
well, people want specifics, so you gave us some specifics, and we're going to try to
answer them. So, one of them is from -- is it okay if I mention the names?
Mr. Keith Girard: Yeah, sure.
Director Nancy Ann-DeParle: I guess, they sent it in. Helen Dean, who
owns a company called Toy Safari in Alameda, California. And I was teasing earlier, I think
I probably have ordered from Helen if she has a web site, because my two boys like to
order toys from the web. She has five full-time equivalent employees now. Her average annual
wages is around $20,000, and she currently pays for coverage, she offers coverage, which
is great, and thank you for doing that. It averages around $350 per person per month.
She said her rates have gone up about 7% a year in the last few years, so she's clearly
facing this. And she says that she has some workers who are over 50, and we know that
that helps to drive the cost up, because people who are over 50 use more healthcare. She said
that she hasn't hired people over the past couple of years because they would need insurance.
So, the fact of having to afford insurance, health insurance, has prevented her from hiring.
And that's something that we really see a lot is there are small businesses out there
who could grow, who have good ideas, people who would like to start small businesses,
and they can't, just because of the cost of health insurance. And she said, I'm limiting
hiring people I need to cover health insurance. And she also said, I'd love to insure all
of them, but I have to rely on parents' insurance to cover the students and spouses' insurance
to covered married employees. So she is struggling to keep this going. So, how would this help
her? And Mark and some of his colleagues helped me to go through this and figure it out. So,
first of all, she would have a tax credit to pay for health insurance. She, by the way,
would not be required to do anything. She's not required to now. She's doing this presumably
in Alameda this is what she wants to do to help attract good employees. She wouldn't
be required to. But if she continues offering, she'll get a tax credit because her firm has
fewer than 25 employees and an average annual wage below $40,000, she'll be eligible for
that. So if anyone is listening or watching who has a similar size business, you'd be
in the same position that Helen would be. So the Toy Safari would be eligible for a
small business tax credit -- depends on the house and the senate bill -- but to help pay
for coverage under their proposals. In the house, she'd be eligible for 50% of her cost,
the coverage cost. In the senate, it's a little bit less, but it goes up to 50% after 2013.
So, you know, there's quite a bit of help there that would be available for her if these
bills pass. Another thing that would help her here is that she mentioned that she has
workers whose age helps to drive up the cost of insurance. Both the house and senate bills
prevent insurers in the small group market from charging higher premiums based on health
status, and they limit the premium variation based on age. So that means that you will
no longer be required to pay higher health insurance premiums because of one or two workers
with comparatively higher costs. And then thirdly, she should get lower costs and lower
premium growth rates if she decides to go purchase through the exchange, which will
be available to her. She mentioned that her rates have increased significantly over the
past few years, and this reform will allow the Toy Safari to pull together with other
small firms and purchase coverage as a group through a competitive health insurance exchange.
Right now, small employers face higher costs because of higher administrative costs because
of the agents out there selling to them, and so we think this could be about 23% of premiums
compared with a much lower amount for larger firms. So we think that will result in a lot
of savings for her, as well. And then finally, we think that this will help her be more competitive
in hiring workers. She mentioned that high health insurance costs have prevented her
from hiring new workers. Under reform, people will have access to high quality affordable
coverage through the exchange, meaning that she'll compete on a level playing field with
other firms that offer benefits and attract and retain talented workers. And we hear that
from small business a lot. So, we think it will be helpful to her. Do you want me to
go through another --
Mr. Keith Girard: Yeah, if you like, maybe one more would be
interesting. I think that really sheds a lot of light on individual and specific cases.
Director Nancy Ann-DeParle: And again, if you can -- we'll try to put
these examples up on the web site, and you'll have them as well. I think it would help if
people see the numbers and how it would affect them. So the second firm is quite a bit different
from the Toy Safari, Keith. This is a firm called Mowat, Mackie and Anderson, which is
a CPA firm, also in California. And the information was submitted from their firm administrator.
They have 40 full-time equivalent employees, and the average annual wages are quite a bit
higher, $45,000. They are currently offering coverage, and that's typical for an accounting
firm with wages of this level. So she says they are currently offering coverage and employees
pay 20%, and the employer pays 80%. Her rates have gone up a staggering amount in the last
few years. She says an average of 28%. So, she's seen a lot of increases. She believes
she has some workers whose health or age is driving up the cost, it's been a problem for
them in hiring more workers or expanding their business. So, one thing that we know right
at the beginning is that she mentioned that the, that she's had some workers whose health
or age has driven up the cost. The adjusted community rating that reform makes possible
will help to prevent higher rates for older or less healthy workers. So that should help
her right off the bat with the premium variation. I should note too that under one of the bills
she would be subject to having employer responsibility and be asked to contribute here under the
other one she probably wouldn't. So that's still something that's being worked out. She's
already doing it, which again we appreciate that she's actually providing insurance. We
believe that reform will enable her too and her firm to purchase through the exchange,
and purchasing through this competitive exchange will help her lower her costs, you know, as
much as right now it's about 23% of her premiums, the administrative costs, we expect that to
fall quite a bit. As well, we also know that all of us are paying a hidden tax right now
of higher premiums that you pay on behalf of the people who don't have coverage who
show up in the emergency room. So that will be a factor in lowering the cost as well.
As I said, she already meets the employer responsibility requirements that might be
there in the house bill. Under the senate bill, we think she probably wouldn't even
have a requirement to participate, but if she wants to continue participating, she'll
be eligible for the tax credits that I mentioned earlier. Do you want to add anything, Mark,
to this?
Mr. Mark Duggan: Sure, and I think just to sort of build on
what you've already said, to the extent that these small businesses are able to get health
insurance for lower prices, lower costs, that's going to translate into either higher wages
for their employees or higher profits for their businesses. And so it's going to really
-- or some combination of the two. So we think that it's really going to be a great
benefit to small businesses throughout the country.
Mr. Keith Girard: Sounds good. Now, obviously, everybody has
their own specific questions, including myself, and I didn't want to have all the fun here.
So we actually went out and asked our readers to submit questions, and got a surprising
response, tremendous number of questions, and what I did was pick the ones that were
representative of all the questions. I'd like to just kind of go through a few of those
with you and have you respond specifically to individual concerns. And I'll just read
from here if I can. First question, one question was from Thomas Shahan (sic) of A-Bear-Cooling
and Heating in Las Vegas. And he asked, I keep hearing frightening figures about what
the bill will cost, but cannot find figures anywhere or what we are all paying now into
health care insurance versus what we will get back so I can make an enlightened decision
then. If you could sum up exactly that point?
Director Nancy Ann-DeParle: Sure, that's a great question, and I'll tell
you the numbers I hear that are frightening are the ones about, what happens if we don't
do anything here, where people are going to be spending $28,000 a person for insurance
in a few years down the road. As far as how much we're spending today, that's an excellent
question. People rarely focus on that. But it's actually around 2 and a half trillion
in our country that we spend annually on health right now. So what we're talking about is
spending, you know, another -- it's probably around 100 billion a year to get everyone
covered and to create this exchange which will lower everybody's costs. And we think
there's a number of ways that your cost will be lowered, one that we've emphasized a lot
is this exchange or pooling mechanism so that you can purchase with much lower administrative
costs and have better choices. Secondly, there are a lot of reforms to the delivery system
in these bills that will help us to get our care in a smarter way, do things like reduce
the readmissions to the hospitals that often occur, you know, within 30 days after someone
checks out, they get sick again, so creating incentives for providers to take better care
of people, those things will be big. The administrative savings from this, all the experts have looked
at it, think those will be -- can be really huge numbers on the current spending. So all
of those things we think are going to lower costs.
Mr. Keith Girard: Good. Good. On a more micro level, a question
that was recurring was what is this going to cost to me individually. And Steve Benish
of Magic Car Wash in Sheboygan, Wisconsin, probably summed that up best, he said, I own
a business with 16 employees, but with sales less than $500,000 a year, am I going to be
required to purchase health care for my employees which I cannot afford, and will I be penalized
if I don't.
Director Nancy Ann-DeParle: Right. Well, for most small businesses and
I believe his certainly would qualify, there won't be any employer responsibility requirement.
You know, some small businesses, at least one of the ones we talked about today, are
providing now, and if they want to continue offering coverage, their costs will be lower,
they'll have access to the exchange and they'll get the tax credits to help them. But there
won't be a requirement that small -- most small businesses participate in this, it's
really only when you get to a larger payroll and a larger number of employees.
Mr. Keith Girard: Another question sort of related, I know we
touched on this a little bit, was how will it affect the health premiums that people
are already paying, and Raju Jairam of MBI Consulting in Fort Collins, Colorado asked,
I'm currently paying premiums for my health insurance, will the health care reform increase
the premiums I'm paying? And will my coverage increase or decrease?
Director Nancy Ann-DeParle: Well, we think that based on everything that
we've seen and all of the experts have looked at that their costs should be lower. So first,
if you like what you have, whatever it is, if you have a health insurance plan that you
think works for you, under these bills it's going to be what we call grandfathered, meaning
that you can keep it. So if you like what you -- the plan that you have, you can keep
it. The only change should be that over time, your costs should be lowered as we do some
of the delivery systems reforms and Medicare and the other programs that we think are going
to lower costs for everybody. And the other good thing, Keith, that just can't be under
-- overemphasized is that let's say you have something you like right now, that's great,
you can keep it under reform, but let's say you decided I want to go start a small business
or, you know, or you -- or you were laid off from your job, after reform, you will be able
to go purchase insurance in the exchange and it will be more affordable to you, if you're
low income, you'll have access to subsidies, premium tax credits to help you purchase it,
and it will enable you to have that peace of mind. I mean, pretty much anybody over
the age of 30 in this country, right now if you try to go in the individual market, you
could have a good chance of being locked out or finding it very difficult to purchase because
of a preexisting condition. This has happened in my family, may have happened in yours.
So that's a benefit of this reform for people who, even if you currently like what you have,
you know, your costs should go down, you should be able to keep it, but if you wanted to change,
if you wanted to start a small business, you'll be able to do that.
Mr. Keith Girard: Another question obviously is -- has been
I heard bandied about in the news a lot is the effect on Medicare and Medicaid, and we
had a question from Lisa Gendron in New Hudson, Michigan, and she asked just simply, how is
this bill going to affect Medicare and Medicaid, with this drastic cut in money, will a lot
of services be cut. And that's an important issue that's I think confusing to a lot of
people.
Director Nancy Ann-DeParle: It is. It has been confusing. And the answer
is no. And, in fact, the AARP, which endorsed the House bill said there's not going to be
a cut of benefits for seniors. In fact, what's so frustrating to me, Keith, is that seniors'
benefits are going to be strengthened in a number of ways. One way is that the Medicare
trust fund, through the changes that are being made to improve Medicare's solvency, will
be strengthened and preserved an additional five or six years under these bills. So right
now, Medicare is facing, you know, a loss of solvency in a few years out, and this is
really strengthening that, extending the life of Medicare. Also, the -- what's called the
donut hole for seniors, which is when they get to a certain level of prescription drug
spending, they have to spend pretty much all their own money, because there's a gap in
their coverage, that's going to be closed under these bills. So that will be a big benefit
for them. We are doing some things to reduce fraud, waste and abuse in Medicare, we're
bringing the additional rates paid to insurance companies under the Medicare program down
somewhat to make it more efficient, but we think this will strengthen the Medicare program.
Mr. Keith Girard: Excellent. Another question, and coming back
to cross again, a lot of people are looking for specifics, and Craig Phipps have kind
of summarized the sentiment from Oklahoma Employment Security Corp. in Oklahoma City
when he asked, you know, what specific provisions are there in the bill that will act to slow
and maintain some control over health care costs. The specifics.
Director Nancy Ann-DeParle: Well, I'd start with the fact that everyone
right now, you know, whoever you are, you're paying a hidden tax of around $1,000 a family
if you have insurance to cover people who don't have it, who go to the emergency room,
who wait until it's very late in an illness to get care, so that's one thing that will
be gone under reform, and that will be savings to everyone. Secondly, the exchange and being
able in the individual and small group market to go in and purchase insurance easily without
the high administrative costs that have been there before, without the preexisting condition
exclusions and all the underwriting and everything, that's going to produce a lot of cost savings
for small businesses and for everybody. Thirdly, there are going to be delivery system reforms
in the bills that will incentivize providers to take better care of people, to bundle payments
so that they're taking care of someone for an entire episode instead of sort of the piecemeal
way they do it now, and the experts who have looked at it see that there would be savings
from that as well. And, you know, finally, there are other provisions in the bills that
will lower costs over time, including some revenue provisions. So we think there's every
reason to believe people's costs are going to go down under reform. And we do know that
without reform, as I said, we're looking at a pretty bleak picture here, both from a family
perspective and a business perspective.
Mr. Keith Girard: One other -- one other question that's come
up a lot and I don't think we've quite touched on enough, is people, a lot of people, maybe
80 percent that do have health care are very happy with their plan right now, and so we've
gotten a lot of questions about how the reform will affect the quality of health care. And
just to give you an example, Greg Kahn of SD Hospitality and Supply in San Diego, California,
asked, you know, he wondered how this plan can save money, by denying care, paying doctors
less, whether that's true or false, and whether this will create disincentive for people to
become doctors and will this kind of erode the quality of health care. So just generally,
what do you see in that sense of how it will affect the quality.
Director Nancy Ann-DeParle: You know, I'm glad you asked that, because
we do see a lot in here that will improve quality. There will be new emphasis on quality
standards and requiring providers to meet them. And let me tell you something, Keith,
doctors support this, you know, the American Medical Association has been very supportive
of getting health reform done, many specialty societies, pediatricians and others have all
said this is what needs to happen. There will be also efforts in this -- in the legislation
to improve the health care workforce and to strengthen it and to make sure that we have
plenty of clinicians, both physicians and physician assistants and nurses out there
to meet the demand. I just want to highlight one number, too, from John Gruver at MIT,
who is one of the economists who has studied this, says that he sees enormous reduction
in small business spending through health care reform. In 2019, absent reform, he estimates
that small businesses will spend about 290 billion a year in health insurance premiums.
And those are just the ones who currently cover. Under reform, he sees that number falling
by about 25 percent to 225 billion a year. He sees an increase in the take-home pay of
small business workers of almost 30 billion a year, and that reform would save about 80,000
jobs in the small business sector by 2019. So it's not just me saying it, there are also
out there economists like Mark who have looked at it and see a lot of benefits for small
business.
Mr. Keith Girard: Excellent, excellent. Well, I really appreciate,
Nancy-Ann and Mark, both your time and effort to -- to meet with us and trying to clarify
some of these issues, it's an historic bill, historic vote, and hopefully we'll see some
real positive change out of it, especially for small businesses.
Director Nancy Ann-Deparle: Great. And we hope we'll continue hearing
from small businesses. And Mark and I have talked about trying to put some more information
up on our healthreform.gov website, and we'll keep working with you, Keith, too, to get
the word out. Thanks.
Mr. Keith Girard: Excellent. Okay. Thanks very much.