Testimony to Senate Committee on Health and Welfare Committee 2-7-08. Andrea Cohen, Vermont Businesses for Social Responsibility
VBSR is a non-profit statewide business association with approximately 550 members. These members employ approximately 10-12% of the state’s workforce and contribute approximately 4 billion dollars annually to the state’s economy.
Since 1992 VBSR has issued policy positions calling for de-coupling health insurance from employment and for public financing of health insurance. We have called out that health care and health insurance are critical economic development issues and that the health care insurance system needs reform so that our employees---our families and neighbors--- can have universal access to quality health care.
We understand you have been focusing recently on controlling medical costs. We are here today to support your work and encourage you to pursue this goal vigorously and make the hard choices that will need to be made. We recently have compiled information from our members that confirms the need to make significant and bold changes to the current system of how we provide and pay for health care.
In response to member reports of continued increases in health insurance premiums, VBSR surveyed our members in the fall of 2007, about the health care insurance benefits they offer their employees and the associated quality and cost of those benefits. We were particularly interested in documenting and quantifying the hard decisions businesses were making in response to market trends. Ultimately, we wanted to ensure that our public policy positions were working toward the benefit of our member businesses.
Over a third of our membership responded (182), most of them small and medium size businesses (80 % have less than 50 employees).
Some key findings:
- More than 80% of our members who responded to the survey offer health insurance to their employees. Half of them pay 100% of premiums. Three-quarters pay at least 75 % of premiums.
The cost of their insurance is soaring. Two-thirds pay $5,000 or more per employee, 22% pay more than $7,500, and 13% pay more than $10,000 per employee per year.
Note: average annual wage and salary earnings in Vermont is around $35,000. Virtually all of our members are paying another 15% or more of that just to provide health care.
Since 2003, more than 40% of our members have seen their health care premiums increase by more than 10% every single year.
This is consistent with statewide data showing private health care premiums rising 80% from 2000 to 2006.
Increased health insurance premiums means businesses are reduced in their ability to invest money back into their business, raise employee salaries, increase other benefits like retirement plan savings, etc. Economic development in our state is very closely tied to the solution of this worsening problem.
As a result of these runaway costs, it is not surprising that:
- More than a third of our members have passed more costs on to employees over the past 5 years
- More than 40% have switched to high deductible HSA accounts that force employees to choose between health care and savings.
As more and more insurance-providing employers are forced to shift to health savings accounts, more and more covered employees forego preventive health care, setting up the system for an explosion of costs down the road.
VBSR is the largest and most active socially responsible business organization in the world. When our members say that health insurance as a benefit of employment is no longer sustainable, we believe policy-makers need to listen.
While employer-based health coverage is still the most prominent source of health insurance the Economic Policy Institute reports that the number of people covered by employer-based insurance has declined every year since 2000 and they estimate that 16,000 Vermonters have lost employer based insurance over the same period.
So given that:
- The costs of health insurance are going up every year, and even the best-intentioned employers can no longer bear this burden
- Employers are passing more and more costs on to employees, and
- The quality of health benefits is eroding,
We believe that the system can no longer rely on the private sector insurance market as it’s backbone.
VBSR calls for the following:
While VBSR is committed to comprehensive, universal, publicly financed health care, we recognize that there are interim measures that can be taken that will both address our members’ needs and concerns and potentially strengthen existing programs:
- Streamline administration with electronic record-keeping and centralized claim processing; identify and implement other cost effective efficiency initiatives.
- Immediately explore alternative methods of financing health care. Identify who will benefit from alternative methods and the relative equity of each system.
- Take steps to “level the playing field” between businesses. (Note the difference between the Catamount Assessment, $1 a day, and what other employers are currently paying). Require state purchasing preference to firms that have been providing high quality insurance to their employees.
- Stop fragmentation of the insurance pool. Move in the direction of getting all Vermonters in one insurance pool, do not implement measures that split the pool further.
- Eliminate wasteful duplication of medical facilities and services.
Please also know that in addition to these measures VBSR supports prevention of chronic illness as a means of addressing overall systems costs in the long run. Programs that support improved eating habits and greater physical activity are a critical part of a sustainable health care system.