Note: This Op-ed first appeared in the July 30, 2006 edition of the Asbury Park Press

By Christine Stearns
Vice President for Health Affairs for the New Jersey Business & Industry Association

The cost of health insurance is rising three times faster than the rate of inflation.  Employers and employees alike are paying more or cutting back on coverage, or both.  And for some employers, health insurance has become too expensive to keep.  With two out of every three New Jersey residents obtaining their health insurance through a private-sector employer, these statistics should be alarming to our policy makers. 
                                 
So what’s the solution?  For some lawmakers, the answer is: make hundreds of the state’s premiere employers pay more.  That’s right, a handful of legislators have been pushing a bill that would require companies with 1,000 or more employees to spend at least $6,874 on health insurance for each employee or pay the difference between that and their actual costs to the state.  This is a tax on healthcare, pure and simple.  Not only is it a bad idea on its face, it also ignores real solutions that would help make health insurance more affordable and more accessible for everyone.

Soaring insurance costs are a real problem for businesses.  The cost of providing health insurance to their employees increased 55 percent from 2000 through 2004, according to respondents to NJBIA’s Health Benefits Survey.  This creates a dilemma for all New Jersey businesses:  skyrocketing costs make it hard to offer health benefits to employees, but to attract and retain quality employees, a business must offer good health insurance.  It’s a balancing act faced by every business, regardless of its size or industry. 

That balancing act provides New Jersey legislators with an opportunity to increase access to health insurance.  Every dollar they can shave off health insurance price increases and every percentage point they lower health insurance inflation will tip the scale in favor of employers providing more health insurance coverage to their employees.  The New Jersey Business & Industry (NJBIA) has put together a comprehensive plan for health insurance reform that would do just that.  In short, New Jersey should offer businesses more affordable healthcare options, improve the quality of medical care, and eliminate duplication and waste in patient treatment. 

We should also focus on small businesses.  Most small businesses (those with two to 50 employees) and individuals in New Jersey purchase health insurance through the State's regulated market.  Unfortunately, the plans sold in these markets are rigidly defined and filled with mandates for specific coverages that drive up costs.

The state should allow small employers in the regulated market to have more flexibility in designing health plans that meet the needs of their employees.  Employers should also be able to purchase more affordable “basic” health plans.  Providing small businesses with more affordable insurance options is the best way to get more businesses to offer health insurance in the first place.

Additionally, state law effectively requires small employers to guarantee that three-quarters of their workforce will be enrolled in their plan.  If just a few workers opt out, everyone could lose their health benefits.  Legislators should change the so-called “75 percent participation rule” for small companies. 

Along the same lines, the number of mandates the State imposes on plans sold in the regulated health insurance market should be reduced.  Individually, mandates appeal to a narrow, specific interest, but together, they account for as much as 20 percent of the cost of a typical health insurance premium, or about $1,500. These mandates force employers and their employees to pay for coverages regardless of whether they need or want them.  What’s worse, these mandates only effect a small portion of the population in New Jersey.  Lawmakers can only impose mandates on plans in the regulated market, which insure about 28 percent of the entire state population.  As mentioned earlier, most small businesses get their insurance from the regulated market, so the cost of mandates falls disproportionately on small businesses.

On the consumer side of the equation, there should be better quality medical care, increased use of electronic medical records, and greater consumer access to information about the costs of healthcare procedures.  Cost and quality go hand in hand.  Medical errors, duplication of tests and a lack of information readily available to the consumer add costs to the system. 

Meaningful policy initiatives are available to lawmakers who want to make real changes to New Jersey’s healthcare system and make insurance accessible to more working families.  It’s not as easy as bashing large companies, but the hard work of real insurance reform would provide much bigger benefits.

With more than 23,000 member companies, NJBIA is the largest state-level employer association in the nation.