One Hoot for Health Care: Local Attorney Skindrud Pleads the Case
Last week, IB promised to offer different perspectives on the landmark health care bill, the Patient Protection and Affordable Care Act, recently enacted by Congress. Even critics calling for repeal acknowledge there is some good in the bill, but local attorney Michael Skindrud, chairman of Godfrey & Kahn’s Healthcare Practice Group, finds a lot of good in it, particularly for small businesses.
Specifically, he finds value in provisions that address long-standing issues of entrepreneurial freedom, creating a level playing field for small businesses, and boosting their ability to retain and attract skilled employees.
Economies of Scale
Under the health care reform law, qualified small employers would be able to purchase group insurance through state-based web portals known as Small Business Health Options Programs, or SHOPs. These are insurance exchanges that will allow small businesses to spread their financial risk by pooling together.
In addition, tax credits would help offset the cost of employer-provided coverage. Starting next year and running through 2013, small employers can qualify for a tax credit of up to 35 percent of their contribution toward the employee’s health insurance premium; beyond 2013, small companies that buy insurance through a state exchange can qualify for a two-year credit of up to 50 percent of their contribution.
Employers with 10 or fewer employees and average annual wages of less than $20,000 would be eligible for the full credit.
Skindrud said the exchanges would create a market place for individual policies and for small employer plans, enabling small employers to take advantage of large numbers of employed individuals — just like the large employers do. He cited statistics that indicate small businesses pay a hefty premium for plans simply because their risk pools are smaller.
“The whole concept here is that through the exchange, small businesses can take advantage of much larger risk pools and bring down the cost of plans to be more comparable and competitive with the plans offered by larger employers,” he explained. “The concept here is to create more of a level playing field so small business owners and their employees are not disadvantaged in the health care marketplace.”
Skindrud thinks the plans for the state-run exchanges — Gov. Jim Doyle has set up the Wisconsin Office of Health Care Reform to oversee implementation — are “quite well thought through.” He also believes there is real promise for smaller business owners and their employees to create large enough pools to ensure that costs are not greater than those of larger employers.
One provision that makes larger pools possible is perhaps the most controversial aspect of reform. Under the new law, any person that is not covered by Medicaid or Medicare eventually will be required to obtain health care coverage or pay penalties. The constitutionality of this requirement is the subject of lawsuits filed by Attorney Generals in several states.
Citing state requirements for automobile insurance, Skindrud sees mostly political grandstanding with regard to the insurance requirement. “The truth of the matter is, if the federal government, for some reason under the Constitution, is not permitted to require people to buy health insurance, all the federal government would have to do is simply put in place a tax for health coverage, and simply tax people for it and provide a public option,” he stated. “The work-around is simply to make Medicare available to everybody and impose taxes on everybody, and that’s clearly constitutional.
“So I don’t think there is much of a threat, from a Constitutional perspective, to this overall health care reform plan.”
The requirement makes sense from a practical standpoint because young people place less stress on the system than older people, meaning they will expand the risk pool without adding much to the expense. “By bringing in all of the younger people in the system and requiring them to have health coverage and paying into the system, you have much bigger risk pools for the insurers that include a big chunk of folks that are relatively non-demanding for health care,” he noted, “and all of that should hold down costs.”
Skindrud believes that removing some of these burdens from small businesses should promote job creation and entrepreneurship. “If they qualify for the tax credits for providing health coverage for their employees, that will be a buffer and make it easier for them to make a decision to hire employees,” he predicted. “I also think that if they are looking for quality employees, and the pool of people they are trying to hire have a choice between a larger employer that offers a health benefits package and a smaller employer who doesn’t, they are at a disadvantage for getting good people. If they can get good people to fill positions, they are more likely to make the decision to hire.”
In addition, he said would-be entrepreneurs who are thinking about venturing out with an idea for a new business, in effect leaving their larger employer to create something on their own, are going to be encouraged to do that under the new law because they will be able to get coverage without regard to pre-existing conditions and be able to buy individual policies through the health exchanges.
“I think the current state of health care in America discourages entrepreneurial activity, and I think this bill will help free people to jump-start their own business,” he said. “At first, just by themselves because they will be able to access health insurance coverage through the exchanges, and those individual entrepreneurs will eventually start hiring people and expand their businesses. I think that’s pretty good for America.”
Restraining Insurance Companies
Between now and 2014, when some key provisions of the bill go into effect, some worry that the cost of health insurance policies will skyrocket. However, Skindrud noted the law establishes oversight bodies to look at premium increases. He noted that one of the forces that created the final push to get the legislation passed was the 39% increase in premiums announced by health insurer WellPoint, Inc.
“In retrospect, they did themselves in by the timing of that, but there are some brakes designed to call into question the big spikes of policy coverage.”
Other Skindrud observations:
On the possibility of coverage for pre-existing conditions adding to the cost of health care:
“Medicare, for the first time, will not charge for preventive care [if the policy is purchased through an exchange]. You will be able to get preventive care without being charged or having co-pays. That is a big deal. It encourages preventive care that keeps people healthier. So yes, some things will drive up costs, but other things will drive down costs. It’s all a balancing act, and that’s the way it should be.”
On the possibility of a VAT, or Value-Added Tax, which is a consumption tax, to help pay for federal entitlement programs:
“I haven’t seen anything in the current legislation that hints in that direction. You’re dealing with prognosticators that are looking over the horizon and thinking that that’s inevitable. I don’t think that’s inevitable. The economy is driven by consumers and consumption is what America is about, for better or worse. VAT is a tax on consumption. Some day there may be political support for that kind of thing, but I don’t see it today.”
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