Brian Klepper
LIKE MANY THINGS IN LIFE, health coverage favors scale. Larger businesses evade benefit mandates that smaller ones must cover. No national numbers on small business health benefits exist, but recent data from Florida, which is probably representative on this issue, showed that the number of small businesses offering health benefits fell 52% between 1996 and 2004. Benefit mandates aren’t the main drivers of unrelenting cost growth, but they contribute to it.
Private health coverage—bought by individuals and businesses—accounts for about half the money that drives American healthcare and comes in two forms. Smaller businesses buy insurance from companies that assume the financial risk and management associated with potential health events.
Currently, insurance programs are regulated by agencies in the states where they are active. In every state, healthcare special interests—from chiropractors to cancer associations—lobby legislators to mandate health benefits that every state-regulated health plan must cover.
But benefit mandates don’t apply to larger businesses that can self-fund health coverage under ERISA, the 1974 Employee Retirement Income Security Act. Larger businesses assume the financial risk associated with health events and typically manage their health plans through “Administrative Services Only” arrangements. The Federal law that guides ERISA plans allows employer-sponsors to define their own benefits packages and trumps state regulations.
In other words, mandated benefits may be hard won and worthwhile, but they’re applied unevenly and are borne by those least capable of affording them.
Thursday, June 1, 2006
