Small Business Principles for Healthcare Reform

10 Principles

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Universal	Private
Affordable	Unbiased
Competitive	Portable
Transparent	Efficient
Evidence-based	Realistic

Our current system of health insurance and healthcare is financially unsustainable and threatens the health and financial security of the American people. Small-business owners and their employees are especially vulnerable to the weaknesses of our current system. NFIB supports policy reforms to balance the competing goals of access to quality care, affordability, predictability and consumer choice. The resulting healthcare system would be: 

Universal:

All Americans should have access to quality care and protection against catastrophic costs. A government safety net should enable the neediest to obtain coverage.

Several reasons underlie our support for universal access to care. First, lack of insurance is especially problematic for small businesses and their employees. Second, having millions of uninsured Americans distracts us from focusing on affordability, quality and comprehensiveness of care and coverage. Third, laws already provide some level of insurance for everyone, but coverage is expensive, inefficient and often inadequate – guaranteed access to emergency rooms is one example. Under this piecemeal coverage, costs fall arbitrarily and inequitably on individuals, providers, governments and businesses.

• Enrollment of the eligible uninsured: Millions of Americans are currently eligible for a variety of public health insurance programs but go uninsured nevertheless. There should be a greater commitment to identifying and enrolling them in the programs for which they are eligible. This process could include simplified eligibility rules and enrollment procedures. Importantly, we find the eligible unenrolled in all settings: large businesses, small businesses, government employment, and not employed.
• Financial assistance for low-income Americans: All Americans, regardless of income, need access to quality health insurance. This requires some form of assistance for those unable to afford such coverage. In the long term, a well-designed system would enable them to gain access to private insurance policies. The safety net should enable the sick as well as the poor to obtain quality coverage.

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Private:

To the greatest extent possible, Americans should receive their health insurance and healthcare through the private sector. Care must be taken to minimize the extent to which governmental safety nets crowd out private insurance and care.

One-size-fits-all insurance and care are not wise options in a nation of 300 million people. Restoring and invigorating America’s healthcare system requires rapid innovation; history shows that such rapid advances rarely come from government and more often come from private enterprises. America’s healthcare system is far from perfect, but the world’s single-payer systems have deep problems of their own. We need better health care delivery models, financial management systems and risk-sharing arrangements. America remains the world’s engine of healthcare innovation, and entrepreneurship is the key to that innovation. Given the current financial path of health care, governments ought to be wary of taking on the entire burden.

• Market-based pricing: Provider prices should reflect costs, quality, and value and should be set by markets, not governments. Price controls reduce the incentive to economize and innovate. They impose shortages, followed by rapid and erratic price increases when the controls fail. Small businesses, including many healthcare providers, rely on flexible prices to tell them when they are succeeding or failing, and to attract customers.

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Affordable:

Healthcare costs to individuals, providers, governments and businesses must be reasonable, predictable and controllable.

America’s healthcare costs are high and growing more rapidly than earnings. The burden of costs often falls arbitrarily on individuals, businesses, providers and governments. Wages stagnate as healthcare costs eat further into take-home pay. Employers and governments struggle to balance budgets as healthcare costs rise. Healthcare uncertainties paralyze long-term financial planning. Through excessive malpractice judgments, we penalize good doctors practicing good medicine when their patients happen to experience bad outcomes.

• Wellness and prevention: The healthcare system of tomorrow should reward both Americans who take actions to improve and preserve their health and providers who assist them in those efforts. Roughly 80% of healthcare expenditures go to 20% of the patients, so managing the costs of a minority of patients can have a substantial effect on overall costs. Our current reimbursement and delivery systems primarily reward after-the-fact actions to reverse illness. A rational system would provide rewards for before-the-fact prevention. Areas for concentration for prevention include the “big five”: heart disease, stroke, high cholesterol, high blood pressure, and diabetes.
• Medical liability reform: Restoring a community of trust between providers and patients is essential to reining in costs, improving outcomes, and reducing unwarranted procedures. The legal system should discourage both providers from making medical errors and patients from filing frivolous lawsuits. The law should encourage providers to self-report errors. Possible reforms include specialized health courts, arbitration panels, and limited punitive damages. Litigants must have access to the traditional court system if they perceive arbitration to have failed. Such reform is especially critical for small physician practices.
• Delivery system reform: The healthcare system exists to prevent and heal illness, and healthcare services are means toward this end. Today’s reimbursement system confuses means and ends, rewarding excessive services and penalizing cost-cutting measures that benefit patients both financially and medically. A better system would encourage physicians, hospitals, and other providers to reimburse bundled services to maximize patients’ well-being.

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Unbiased:

Healthcare and tax laws should not push Americans into employer-provided or government-provided insurance programs and hobble the market for individually purchased policies. Small employers should be treated the same as large employers, who can already pool across state lines. A healthcare system built on employer mandates or on play-or-pay taxes is unacceptable.

Today, our tax and insurance laws riddle the health insurance market with inefficiencies. An employer who buys insurance for employees can write off the cost on its taxes. But if employees wish to purchase different policies on their own, they receive no tax benefit. Thus, an oddity of the tax code, not economic efficiency, artificially herds businesses and workers into the employer-based market. Current laws allow large employers to build large interstate risk pools and enjoy a reasonable level of regulatory oversight. Laws deny small employers the same opportunities, forcing them to offer insurance with inadequate risk pools. The result is to arbitrarily load a competitive disadvantage on the small firms that are an engine of America’s productivity. Employer mandates compound the problem, penalizing the most vulnerable firms and workers, including cutting-edge startups, lower-income workers striving to rise and companies operating in economically disadvantaged markets. These mandates can force a promising enterprise out of business, sweeping away jobs and future economic growth.

• Tax equity between group and individual markets: Differences in tax treatment should not determine whether a person secures health insurance in the workplace or on their own. The current tax treatment of insurance premiums disproportionately tips the scale in favor of employer-based coverage. This tax inequity reflects an ad hoc reaction to World War II-era price controls. One possible approach to achieving equity is to explore the possibility of capping the tax exclusion on insurance purchases.
• No employer pay-or-play: Like employer mandates, pay or play requirements threaten the livelihoods of the most vulnerable workers in the most vulnerable firms, most of which are small. The effect is largely to tax those who cannot afford to pay the tax. Monetary contribution by employers has traditionally been a voluntary role and should remain so.
• No employer mandates: All employer mandates (payroll tax, required premium contributions, pay-or-play) destroy existing jobs and inhibit additional job creation. Faced with employer mandates, many firms will have to replace full-time American workers with part-timers, machines, or foreign outsourcing. Other employers will simply close their doors. Employer mandates arbitrarily reward wealthier firms and wealthier workers at the expense of the most vulnerable firms and the most vulnerable workers – those just beginning their climb up the economic ladder. Firms ought to play roles in assuring their employees’ health, but they cannot do so if they are driven out of business or forced to reduce workforce.

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Competitive:

Consumers should have many choices among insurers and providers. Policymakers must alleviate the limitations that state boundaries and treatment mandates place on competitiveness.

In the next decades, America’s capacity to deliver high-quality healthcare will face increased financial pressures. Maintaining or improving upon our current quality of care will depend critically upon our ability to develop newer and less expensive modes of treatment and delivery systems. Innovation is unlikely to come from a system where insurers or providers face little risk of competition. Under our current system, restrictions on interstate purchases of policies place powerful limits on choice. Some states are left with close to monopoly control on the issue of insurance as fewer and fewer insurers offer coverage in the small-group market. A cautionary note is in order: Any competitive system must guard against adverse selection—a situation in which some individuals purchase policies only after learning that they are likely to face high medical costs. Adverse selection can render insurance too expensive for healthier individuals. (In property insurance, an example would be someone who buys fire insurance only after he moves dangerous, combustible materials into his house.)

• Maintain consumer choice of insurance: Consumers ought to be able to buy insurance that fits their individual needs. Consumer-driven options are a critical tool for changing the utilization behaviors of consumers. These options include Health Savings Accounts (HSAs), Health Reimbursement Accounts (HRAs), Flexible Spending Accounts (FSAs), and High-Deductible Health Plans (HDHPs).
• Maintain consumer choice of providers: Consumers must have wide latitude in selecting doctors, hospitals, and other providers they trust. Governments must not choose providers for citizens, nor should they limit consumers’ choices.
• Increase choice among plans: The families of small business owners and employees bear the brunt of the current system’s failings, not only because of flawed government policies, but also to private insurance market failures. Large-group purchasers already have a broad array of options in plan design. Each consumer – regardless of individual, small group or large group market – should have access to enough plan choices to generate the cost-saving, quality-improving benefits of competition.
• Availability of primary care physicians: Efficient, effective medical care relies on the ability of Americans to develop relationships with high-quality primary care physicians (PCPs). Many of these physicians are small business owners with family practices located in rural and urban communities that are medically underserved and lacking physicians for the population. Our system of medical education and our reimbursement procedures must be reformed in order to assure an adequate supply of PCPs.

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Portable:

Americans should be able to move throughout the United States and change jobs without losing their health insurance.

Our current health-insurance system locks people into jobs and localities. An existing health problem may make it impossible for an individual to change jobs. Employer-based health insurance and restrictions on purchasing insurance across state lines limit a worker’s ability to seek higher pay, greater opportunity, or a better locality for his or her family. This phenomenon of job lock is not only a tragedy for the locked-in worker; It harms the overall economy by preventing workers from discovering their own entrepreneurial talents or accepting more productive jobs. It creates a significant impediment to those who wish to leave positions as employees and start small businesses of their own. Healthcare reform must maximize the mobility of American workers by eliminating health insurance as an impediment to changes in job and residence. 

• Access for high-cost and high-risk patients: The healthcare system must evaluate and examine how best to deliver care to high-cost and high-risk individuals. Today, these Americans are often only able to obtain insurance through high-risk pools. A better approach might be risk adjustment mechanisms giving private insurers the incentive to coordinate care for patients with pre-existing conditions. Such mechanisms could also give these individuals a greater capacity to move between plans.
• Portability between jobs: People should be able to move from one job to another, between a job and no job, and from state to state without losing insurance coverage or encountering excessive cost increases, no matter whether costs are borne by the individual or by an employer. In part, this goal can be met through more affordable, transparent policies and lower administrative costs. In the case of those with pre-existing conditions, however, additional market reforms are necessary. The goal is an insurance market in which subscribers experience relatively seamless transition when moving between group and nongroup contracts.

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Transparent:

Information technology should enable all parties to access accurate, user-friendly information on costs, quality and outcomes. Providers must be able to obtain relatively complete medical histories of patients. At the same time, patients’ privacy must be guarded zealously. The private sector must play a vital role in developing the new technologies.

In any market, buyers and sellers need accurate and useful information on costs, quality and performance of the product. Healthcare is no different in this respect. Well-functioning health insurance and healthcare markets require information that is easy for consumers, providers and insurers to obtain and that is comprehensible to all. Today, information is often difficult to obtain and incomprehensible to consumers and providers alike. This is a function of the system we have, and not an inherent characteristic of health care data. Governments will have a role in the development of new and better information technologies, but many of the breakthroughs can come only from the private sector.

• Easier insurance comparison: Currently, the task of choosing among policies is complex, confusing, and arduous. Small businesses today are forced to accept excessive premium increases because the time and cost of evaluating alternative policies are too daunting. Individuals and groups must be able to compare and contrast insurance policies, quickly and without specialized training. Ease of comparison requires better information technology and more intuitive, standardized, readable insurance policies.
• Healthcare literacy for consumers: Reforming healthcare requires us to harness the information-gathering skills that consumers use in other complex markets. Consumers need better, timelier information in easy-to-understand formats, enabling them to easily turn to friends, neighbors, and coworkers for advice. Providers, insurers, employers, and governments must all assume roles in helping to equip a population to make good healthcare decisions. Small business employees face unique challenges, since their firms may not have human resources departments to guide them in their choices. A standard clinical vocabulary is a necessary element of such interoperability.
• Business literacy for providers: Healthcare providers must be as literate in the business of healthcare as they already are in the science of their fields. Small-practice providers bear a particular burden in this respect. Providers must be capable of offering clear, concise, comprehensible data on outcomes and costs of treatment options, so their patients can make sensible decisions. Provider groups, insurers, employers, and governments all have roles in developing better communication between providers and patients.
• Data for decision-making: Doctors’ and patients’ decisions must be informed by up-to-date scientific and financial data. Aggregate outcomes and cost data ought to be generated, available, and easily usable by all parties involved in the healthcare system. Building on electronic medical records and interoperable health information technology, we can develop more coherent and effective guidelines for treatment of illness, wellness, prevention, and cost control. Data will allow patients and providers to improve care and coordinate multiple providers in the delivery of that care. Data-based incentives can be an integral part of the healthcare system, but must not override providers’ judgment or interfere in the patient/provider relationship.

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Efficient:

Healthcare policy should encourage an appropriate level of spending on health care. Laws, regulations and insurance arrangements should direct health care spending to those goods and services that will maximize health. Adequate risk pools throughout the health care system are vital to accomplishing these goals.

Today’s healthcare system encourages misallocation of resources. All parties lack access to vital information for making medical decisions. Providers can give too little guidance on cost-effective treatments because they lack access to accurate, comprehensible, comparable cost data that provide true “apples-to-apples” comparisons of services and treatments. Reimbursement systems encourage excessive spending on health care and poor spending choices within health care. Medical delivery systems are poorly structured. American health care is on an impossible path, with costs rising much more rapidly than the country’s real economic output. To avoid catastrophe, incentive structures across the system need to be reconfigured to give consumers, providers and insurers the educational tools and the motives to use their dollars wisely and efficiently.

• Administrative cost savings: Insurers must streamline the process of determining eligibility and enrolling in an insurance plan or changing plans. Today’s administrative inefficiencies render this process complicated, time-consuming, and excessively expensive. We must build on current efforts toward more efficient markets, including better claims processing and timelier and more accurate data collection and dissemination. Streamlined regulatory structures would help them achieve this goal.
• Larger, more stable risk pools: Risk pools must group together enough individuals that financial losses for the pool as a whole are stable and predictable. Small business pools are often inadequate and unstable, and current law makes it difficult for them to adequately aggregate. Highly segmented markets must combine to spread risks more evenly across large numbers of covered lives.
• A workable marketplace: America’s highly mobile population expects and should have access to health services where needed. The dysfunctional small group and individual insurance markets impede the ability of people to seek care and to seamlessly continue their coverage and care as they move throughout their lives.

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Evidence-based:

The healthcare system must encourage consumers and providers to accumulate evidence and to use that evidence to improve health. Appropriate treatment choices and better wellness and preventive care should be key outcomes.  

Current information and decision systems make it difficult to accumulate, interpret and use evidence affecting treatment decisions. One result is overspending on treatments and underspending on prevention. Decision-makers must understand the impact of their decisions on both costs and outcomes. Such an understanding must be based on solid clinical and economic evidence.

• Evidence-based benefit mandates: At present, the financial burden and wide variance of benefit mandates falls most heavily on state-regulated insurance products.  Mandates must not be so broad and numerous that they render insurance unaffordable. Scientific and economic data must be used to balance costs and benefits of treatments, thereby insuring that services are available and affordable. Ultimately, the choice of care must be driven by the physician-patient relationship, guided by medical science.
• Real-time information: Providers and consumers need adequate, accurate, real-time data on patient histories, outcomes, and costs. This requires the adoption of healthcare information technology, along with adequate training for providers and consumers to make good use of it. Secure, portable, electronic medical records would be a cornerstone of such a system and would improve the course of medical treatment for individuals. EMR data could also form the basis for aggregate cost and outcomes data. Widespread, timely adoption will require incentives for providers with particular attention to the smallest firms so that the entire provider population can maximize technology.
• Pay for performance: The healthcare system must move toward payment for improvements in health, rather than for services performed. In other words, the system should pay for output, not inputs. Standards across the healthcare system should be established to reward providers for improved combinations of cost and outcomes. These standards, however must be carefully crafted so that the standards do not impede innovation or impair quality.

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Realistic:

Health care reform should proceed as rapidly as possible, but not so quickly that firms and individuals cannot adjust prudently. It is important to assure that no one’s quality of care suffers, as we move to provide coverage for all Americans.

Reform is a delicate balancing act. Moving too slowly will allow costs to rise too far and too fast. In the process, the health of Americans will suffer, and the financial security of some will be disastrously impacted. But excessive speed is also risky. Thus, we must assure that reform does not allow some Americans to slip through the cracks—to lose coverage or see their costs rise too rapidly. Somewhere in between is a seamless transition from the status quo to a more efficient and equitable system.

• Restore fiscal responsibility to public insurance programs: Long-term healthcare reform will be unsustainable unless steps are taken to stabilize the finances of our nation’s social insurance programs. With nearly 40 percent of the nation’s insured covered by federal programs, a comprehensive review of Medicare, Social Security and Medicaid must be conducted. Such a review should also include actionable recommendations on how to reduce wasteful spending and increase program efficiencies.
• Periodic review and revision: Healthcare reform is a long-term process, and not a one-time fix. Once reforms are implemented, they must be accompanied by adequate information on cost, coverage, and quality. As new systems are implemented, we must have the ability to adequately observe cost and outcome trends. This will allow the system as a whole to observe best practices, make course corrections, and continuously improve the delivery of healthcare. These best practices must include identifying which strategies and institutional arrangements work best for small business, as well as for large firms, governments, retirees, and others.

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