I used to think that the WSJ had good health care reporting (if not the best). But it looks like its reporting may be heading the way of its editorial page. In an article called High Deductible Policies Offer Savings to Firm and Its Workers there’s a standard bunch of ra-ra tripe about how high deductible plans are good for employers (Duh!) and their workers (at least the healthy ones). (A summary version for those of you with no access is here). It’s a pretty uneducated piece, and I explained a while back over at Spot-on why what’s good for General Motors (or actually Intel) is in this case irrelevant for America. (The gist is that their sicker employees can afford to pay more into the “pool”, whereas America’s sicker citizens can’t).
But it beggars belief when I read this sentence:
ITAGroup joins a growing number of small businesses that are adding high-deductible plans in a push toward “consumer driven” health care. Fifteen percent of companies with between 100 and 499 employees have adopted them, according to a 2006 survey by the U.S. Chamber of Commerce.
So much so that I wrote this to the author:
Of course the Journal covers healthcare from this point of view (and who really cares how you define a small business?) because its written for the business and Wall Street crowd.
With HSA’s, consumers will give more money to Wall Street, because they have to invest it somewhere until they need it. While individual accounts might not amount to much, if everyone had them, that would put billions more in assets under management.
Are HSA’s a good thing? Depends on your perspective.
Here’s an email exchange with Simona Covel who wrote the article about ITAGroup:
Re your article about ITAGroup yesterday.
You’ve clearly been hanging out on Wall Street far too long if you think that 450 employees constitutes a small business. It’s very clear from the data that the real problem with health insurance from employers is in the availability of employment-based insurance in sub-200 employee firms and even more so in sub 50 employee firms (see enclosed chart).
What benefit changes at the margin for a business that is at the least medium sized (and has completely different health insurance problems than genuine small businesses) has to do with “small business” health insurance escapes me. And how HSA/CDHP fix that problem is not something that the WSJ appears to want to talk about much in its editorial section. I’d hope that it would do better in the “news” section
And then Brian Klepper from CPHR chimed in:
Hi Simona. Let me chime in to support Matthew on this point. Now and then he gets lucky and is right.
While my work is national, I live in Florida, know the people in Tallahassee, and have data from the Florida Dept. of Financial Service’s Office of Insurance Regulation (OIR). Those data clearly show that the rate of “health coverage enrollment erosion” is about 3 times faster in small business. (Small business is generally defined in the insurance industry as fewer than 50 employees.)
Florida is a state dominated by small business. Between 1996 and 2004, while the state’s population grew by 3 million, 132,000 small businesses here dropped coverage, a 53% decline, and small group enrollment fell by 760,000 (42%). These numbers are based on actual enrollment reports to the OIR, and so are much harder than survey data. They’re also more dramatic than those generally posted by the big consulting houses or, for that matter, the Bureau of Labor Statistic (Bill Wiatrowski), which tracks health coverage enrollment trends for the Feds.
BTW, I shared these number with Vanessa Fuhrmans some time ago.
Finally, if you’re going to talk about the move to HSAs and High Deductible Health Plans, you might also want to track hospital bad debt, which is now skyrocketing in both safety net and carriage trade facilities because 1) relatively few employers who move to HDHPs establish and fund HSAs for their employees, and 2) the new plans have much skinner benefits and higher out-of-pockets, so when patients present they often can’t make their deductibles and their co-pays or they find that the care they need is no longer covered.
Hope this is helpful.
Brian R. Klepper, PhD
The Center for Practical Health Reform
To which Simona replied:
Hi Brian, Matthew –
Thanks for your note. I grew up as the kid of a dad with a small business employing a dozen people and a mom with a small biz employing about half that, so I know what you’re talking about. But, the WSJ adheres to the Small Business Administration’s size parameters, laid out here:
The Office of Advocacy defines a small business for research purposes as an independent business having fewer than 500 employees.
Firms wishing to be designated small businesses for government programs such as contracting must meet size standards specified by the U.S. Small Business Administration (SBA) Office of Size Standards. These standards vary by industry; see http://www.sba.gov/size
I realize the the HSA concept is laden with controversy. But for the purposes of this particular section, the idea is to profile how three different companies are handling benefits costs – and the overall benefits environment. There just isn’t time in that type of piece to dissect the macro implications. Trust me – I wish there were. I’d love it if you would go to the message board at http://forums.wsj.com/viewtopic.php?t=399 and post your thoughts.
Thanks for your feedback,
To which Brain replied:
One comment. The WSJ’s adherence to SBA parameters notwithstanding, the insurance industry defines small groups very differently. In the insurance world, 50 employees is a small group and 450 employees is, as Matthew says, a midsized group. 1,000 is a large group. 10,000 or more is a jumbo. Call any bottom dwelling insurance salesman…errr, broker… and he’ll confirm this. Methinks there’s a standards mismatch here that should be reconciled. It’s generally best to follow the standards of the industry you’re reporting on.
And I replied:
Thanks for the reply and thanks for pointing me to the SBA website (not exactly easy to navigate). But eventually I found this:
“SBA has established a size standard for most industries in the U.S.
economy. The most common size standards are as follows
* 500 employees for most manufacturing and mining industries
* 100 employees for all wholesale trade industries
* $6.5 million for most retail and service industries
* $31 million for most general & heavy construction industries
* $13 million for all special trade contractors
* $0.75 million for most agricultural industries”
So you’re fudging a bit with the 500 number–although we’re splitting hairs over whether ITA is a service business in which case it’s very large (certainly over $6m) or wholesale trade or manufacturing.
What’s more if you look at the stat abstract XL file I enclose, total employment among firms with less than 100 employees is (or was in 2002) about 41m, whereas employment in the 100-499 group was 16m–less than half that of smaller firms. So not only are the vast majority of small businesses in that group (of course) but also substantially (41m/57m) more than half the small business employees are.
What’s more important is that as the KFF numbers I sent you before and Brian’s email shows, it’s the segment of the employer market below 100 employees (and actually below 50) that is having the biggest problem. Not the biggest small businesses like ITA, which as they are large enough to self insure, do not act like small businesses in the purchaser market for health care.
And I think we won given Simona’s last comment
You guys are getting me thinking, which I always appreciate. As you know, Small Business Link is a new section – and an entirely new WSJ conception. (It’s also a new beat for me – I used to cover junk bonds!) So we’re learning! Relating to your comments on the prevalence of micro businesses – perhaps it would be more apt to call it “Small and Medium Business Link” — we’re not reporting on business with fewer than 50 employees, because their concerns are often so starkly different. Whether or not that decision is responsible – well, I think I can glean where you stand on that.