The high cost of health insurance is the result of a combination of factors: from unnecessary procedures and high administrative costs to the high quality of healthcare we enjoy in the US. For small businesses in New Jersey, however, one such cause impacts them almost exclusively, and it’s one that, in theory, is easy to fix: legislatively imposed coverage mandates.
These mandates take the form of bills requiring coverage for specific diseases or conditions. And, while each mandate by itself may not seem like a big deal, collectively they are adding costs to health insurance policies that are purchased primarily by individuals and small businesses.
Each coverage mandate comes with a price tag: Insurance companies have to pay for more procedures and medications, and will therefore have to increase premiums to make up the difference. In other words, these mandates effectively force consumers to purchase higher levels of coverage.
At present, NJBIA is following 76 bills that would require insurance companies to cover a particular medical treatment. NJBIA generally opposes these bills. For one, they are supposed to be reviewed by the Mandated Health Benefits Advisory Commission beforehand to ensure the benefit is worth the cost. Most bills skip this step. Until New Jersey comes to grips with the cost of health insurance, it should not take actions that will make it even more expensive.
Unfortunately, the individual mandates themselves are hard to argue against. After all, if someone has a particular medical condition, it’s natural to want them to have coverage for that.
What gets lost in the debate is the limit of the Legislature’s authority to mandate insurance coverage. They can only impact policies sold in New Jersey’s individual and small businesses health insurance marketplaces. Larger companies usually self-insure or have national insurance policies, which are regulated by the federal government. In other words, our legislative mandates apply to less than half of all insureds.
New Jersey’s Small Employer Healthcare Marketplace was created in the 1990s to help businesses with 50 or fewer employees find affordable care by making it easier to shop for coverage. Mandates, however, price businesses out of the small employer market. The number of businesses purchasing coverage here has dropped from 900,000 to 325,000, as employers turn to private benefit providers like Association Master Trust, which is available to NJBIA members.
Small businesses struggle the most with the high cost of insurance because they have limited resources compared to large companies and relatively few employees, which tends to make rates higher. According to NJBIA’s Health Benefits Survey, businesses with fewer than 50 employees paid around $16,000 for family coverage compared to a little over $12,000 for companies with 250 or more workers.
Let’s be clear: The high cost of health insurance is not the result of mandates alone. How people use healthcare, the administrative costs of processing insurance claims, legal liabilities and a host of other factors contribute to a rate of healthcare spending that is increasing at a rate more than double that of overall inflation.
But mandates are relatively easy to fix. Legislators do not have to cut anything; they simply just have to stop mandating that employers purchase richer plans.
In a perfect world, we would all have insurance policies that we can afford and that will take care of whatever healthcare we consume. Until then, however, we can at least rein in the mandates that impact the groups that can least afford them.
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