June
5, 2008
Federal
Issues Committee
The following is for study only and has NOT been approved by the Board of
Directors.
Issue:
New legislation concerning
a Small Business Health Options Program (SHOP) has been introduced and is
supported by NAR.
Action:
Action is not required at this time
Options:
1.
Support
2.
Oppose
3.
Neutral
4.
Not Real Estate Related
5.
Other
Status/Summary:
On April 2, 2008, Senator Durbin (D-IL) introduced
S. 2795, the "Small Business Health Options Program Act of 2008". S. 2795
was referred to the Senate Committee on Finance and currently has three (3)
cosponsors. S. 2795 would create a small business health board and an
administrator within the Department of Health and Human Services to create,
monitor, and maintain health plans for small businesses and the
self-employed (HPSB) that can be state-by-state or nationwide. These
HPSB would be available to both small business and those that are
self-employed. A small business is defined as an employer who
employed no more than 100 employees (who worked an average of at least 35
hours/week during the year preceding the date of application.
Self-employed is defined as at least $5,000 in net earnings or at least
$15,000 in gross earnings in the preceding taxable
year.
Under SHOP, there would be encouragement for states to set up their own
statewide small business and self-employed insurance pools, but there would
also be offered a nationwide pool for those states that decide not to
participate, or as a second option. The nationwide pool would not
come into effect until two years after enactment of S.
2795.
Currently, any state that wishes to create a
statewide small business health insurance pool is able to, California being
one of those states. However, it is unlikely that many states will
use this legislation to create their own statewide pools. Therefore,
it is likely that while this legislation does offer the creation of
statewide health insurance pools, the likely focus and outcome would be the
nationwide insurance pool. Nonetheless, any state that does develop a
similar program (i.e. similar rating rules, no health status rating,
etc...) will be allowed to "opt-out" of SHOP. If a state decides to
take this action, the small businesses and self-employed in that state
would be prohibited from joining the national pool.
The benefits seen in a nationwide pool can include a larger pool base to
spread risk and cost and extra value for multi-state businesses.
Every plan offered under SHOP will be required to be licensed in every
state in which it operates. However, the state will not be able to
regulate the minimum benefit package for a nationwide plan.
California historically has some of the strongest minimum benefits in the
nation; so a new nationwide plan under SHOP could undercut California's
current small business health insurance plan and force these participants
into the nationwide pool, where there is the possibility or weaker minimum
benefits.
As of yet, there are no set minimum benefits
mandates enacted. During the two-year period from enactment until a
national pool could be offered, the Institute of Medicine would make
evidence based recommendations factoring in medical effectiveness,
efficiency, cost effectiveness, and affordability and present the findings
to the SHOP Administrator. The Administrator would then be required
to take these findings into consideration, although not be required to
implement them as recommended in his final decision on what the minimum
benefit mandates would be. After the Administrator has made his
conclusions, the decisions would have to be published for public comment
before anything could be enacted.
Additionally, after all the minimum benefit mandates and ratings are put
into place, the changes to premiums would be based on age, geography, type
of plan, selective behavioral characteristics (i.e. smoking), but not based
on claim history.
Some additional features
included in SHOP are:
-
Tax credits to small
employers and self-employed to help offset costs (If the employer pays at
least 60% of the premium they will get a $1000/person $2000/family
credit. Self-employed will get a $1,800 credit/person
$3600/family). The full credit is available to employers of 10 or
less and phases out up to 50 employees.
-
Health
status rating will not be permitted under SHOP.
-
Allows
trade associations and other entities to act as "Navigators" and work with
the Administrator of SHOP to disseminate information.
-
Includes a six-month exclusion of coverage for preexisting conditions for
those who did not have health insurance immediately prior to joining SHOP
to discourage those from waiting until they are sick to join.
Additionally, it includes an additional premium (based on the length of
delayed enrollment) for those who do not have other insurance and fail to
join SHOP when it is first offered.
-
This
is a true group market, meaning it would pool all small businesses and
self-employed into one group plan.
-
The
insurance is guaranteed issue, meaning it will not turn away individuals
due to prior health conditions or fear of future health
conditions.
Background:
The
issue of HPSB has been a priority for NAR, especially during the
109th Congress. Previous attempts to have Association
Health Plans or Small Business Health Plans have met with hurdles and
discontent over various aspects of the plans. S. 2795 was developed
with these past stumbling blocks in mind and written in an attempt to find
a common ground.
Previous versions would have pre-empted states laws and standards for
healthcare. This was an issue for California REALTORS® as California
currently has a statewide small business health insurance pooled program
that provides strong state mandates that would have been pre-empted under
previous legislation.
The issue can be controversial and heated as healthcare is a priority
across the nation. Many states do not offer HPSB coverage as
California does and therefore, many REALTORS® across the nation, as well as
other small businesses and self-employed, find it hard to get affordable
healthcare coverage.
In the past, C.A.R. has not lobbied for these HPSB because they would have
been more restrictive and possibly harmful to the current HPSB that the
state of California offers. Nonetheless, C.A.R. has not lobbied
against these proposals, but rather stayed neutral on them. C.A.R.
had a self-funded HPSB in the past and it was a devastating experience when
it was forced to fold and many REALTORS® lost coverage. It is
important that any new HPSB be equal to or enhances the HPSB already
offered in California in order to protect California REALTORS®.
Pro:
This could create a large pool for small businesses and the self-employed
to get more affordable healthcare coverage. Because it does not
create a separate pool for each industry, REALTORS® could potentially be
joined with other small businesses which have lower cost
demographics. Additionally, there are tax credits provided to
employers who are willing to cover 60% or more of the premium and the
self-employed get a tax credit as they would be covering 100% of their
premiums.
Con:
While SHOP encourages states to develop individual state pools, the reality
is that there is no incentive for a state to start this process if they do
not currently have one. SHOP would create a national pool and there
is no incentive for other states to develop a program when the national
pool can be used.
Therefore, the new HPSB could be in competition with California's existing
small business health insurance plans. This could siphon individuals from
California's small business health plan pool, which uses its size and lower
risk employee pools across various industries to negotiate reduced rates
for health, dental, and vision plans that a small business, particularly
REALTORS®, given our higher cost demographics, otherwise couldn't
afford.
Additionally, depending on what mandates the small business health board
and administrator decide on, a national plan could be offered where the
mandates are much lower then those offered in California. While this
can reduce the premiums in the short run, it can also greatly reduce the
coverage and if a participant does fall in, can greatly increase the costs
in the long run.
Impact on REALTORS®:
The possible impacts on
REALTORS® can be multi-faceted. On the one hand, a new program can
offer REALTORS® more option when it comes to healthcare choices and could
open up a second insurance pool for REALTORS® to join and spread the risk
and costs; which can be helpful as REALTORS® traditionally fall into a
higher cost demographic.
However, at the same time, California REALTORS® currently in the California
small business insurance pool can find that their power is weakened if more
people leave that pool for the national plan. This could in turn hurt
those REALTORS® who may wish not to switch over to the national plan due to
the possibility of it offering less in minimum mandates.
The issue of affordable healthcare is a major issue in every state and
across every demographic. Currently, California REALTORS® are able to
participate in California's small business health insurance pool, but not
all states offer such a plan to REALTORS®. Nonetheless, many find
these plans expensive due to the fact that participants are not rejected,
even with preexisting medical conditions.
Balancing the want to provide affordable healthcare for all and still
maintaining a stable insurance pool large enough to have negotiating powers
to obtain better rates and maintain effective and critical mandates is a
tricky situation. This is especially true for California REALTORS®
who have had to go through the grisly process of seeing our previous
self-funded insurance plan fail and have thousands of California REALTORS®
lose their
insurance.
NAR
Policy:
At the May Mid-Year NAR
meetings, a motion was passed: "That NAR adopt the following health policy
principles recommended by the Insurance Task
Force:
1. The nation and its health care system are
best serviced by having all citizens covered by health
insurance.
2. Health care coverage and/or insurance should be made available to
all.
3. Individuals should have health care coverage that is continuous,
i.e. allows for no gaps in coverage.
4.
Individuals should have the ability to choose their preferred health
insurance plan from an array of policy options that offer choices in the
scope of covered services and policy costs.
5.
Health care coverage should enhance health and well-being by
providing preventative health services and chronic disease management
services.
6. The health care delivery system must provide cost effective,
quality care in an efficient and timely manner in order to be affordable
and sustainable for society. Cost containment, therefore, must be a
component of any reform
effort.
7. A "single payer" health care system in which the government pays
for and allocates health care services should be
opposed.
8. Employers should
not be required to offer employee health insurance program.
C.A.R. Policy:
C.A.R. has taken a "NEUTRAL" position on past association and small
business health plan legislation.
New legislation
concerning a Small Business Health Options Program (SHOP) has been
introduced and is supported by NAR.
