Health Insurance Costs Stymie Small Businesses

The rising cost of health insurance has made it difficult for owners of small businesses, including physicians' offices, to provide health care benefits for themselves and their employees. This creates gaps in coverage and fuels the nation's health care crisis, said a family physician who testified before the House Committee on Small Business here on Jan. 23.

Stephen Eby, M.D., of Cincinnati is the owner of Western Family Physicians, a family medical practice on Cincinnati's west side that employs six physicians and 25 other staff members. Although the practice has always provided health insurance coverage to attract and retain good employees, "we have never been able to afford health insurance for our workers' families," Eby told the committee.

"Between 2003 and 2008, the cost of a single policy has increased 80 percent, an average of 16 percent a year," Eby testified. "This staggering escalation has occurred despite other steps we took, such as increasing the deductible to $500 and the copays by 33 percent."

The monthly premium for family coverage in Cincinnati, even with high deductibles, is $1,300, which amounts to more than half of the average office worker's monthly pay before taxes, said Eby.

"Because of these astounding expenses, one of our receptionists, a single mom, is able to afford coverage only for herself," he said. "Her children, therefore, went on Medicaid."

Eby also told the committee, "my wife and I cannot obtain health insurance through my practice because the premiums are unaffordable."

Eby said he is aware of "medical practices in the Cincinnati region that are not able to get health coverage at any price because their employees have common chronic conditions, such as diabetes, high blood pressure or heart disease."

"I suppose when these people become ill, they will have to go to the emergency room and pray the hospital bills don't drive them into bankruptcy," he said.

The inability of physicians to "offer adequate health insurance benefits to their employees, or in some cases, even themselves, is more proof that a health insurance crisis exits today in this country," Eby asserted.

"And this is occurring while health plans are reporting record profits," he added.

Eby was joined on the panel by five other witnesses, who represented a cross section of society and business interests. All of the witnesses delivered the same message -- the rising cost of insurance is pricing them out of the insurance market, forcing them to curtail and even drop coverage. Cathey Sandman, an in-home child care provider who testified on behalf of the National Federation of Independent Business, said she was forced to drop her own insurance a few years after her husband joined the business as her assistant and business partner.

"It was not an easy choice, but after the last few premium increases, the monthly cost for our health insurance was the same as the cost of our monthly mortgage payment," said Sandman. "Since I am self-employed and work out of my home, I felt there was no other choice; I simply could no longer afford to pay the equivalent of a second mortgage payment."

Within two weeks of dropping her coverage, Sandman became ill with appendicitis and now is struggling to pay hospital and doctor bills that total more than $10,000.

As a family physician, Eby brought a medical perspective to the hearing, telling the committee members, for example, that physician payment rates under Medicare have not "kept pace with medical inflation," thanks, in large part, to the sustainable growth rate formula, which is used to determine physician payment levels.

"Physicians are currently being paid at 2001 rates, and if Congress doesn't intervene, a steep 10.6 percent cut will take effect July 1 of this year," Eby said. He called on Congress to "recognize and appreciate the emergency situation that has been created by the arcane Medicare payment formula."

During the question-and-answer period, Rep. Nydia Velazquez, D-N.Y., chair of the Small Business Committee, asked Eby how much his company's health care premiums have increased in recent years.

"In a good year, it is 10 percent," Eby answered. "In a bad year, it is 30 percent -- we have seen jumps that high in one year."

Despite the increases, the coverage "never gets better, it always gets worse," resulting in higher deductibles and copays, Eby said.

Ranking committee member Steve Chabot, R-Ohio, whose district includes Cincinnati, asked whether the nation's medical malpractice laws and the pursuit of frivolous lawsuits have played a role in driving up insurance costs. Eby said medical malpractice laws are a "significant problem," contributing to increases in both insurance rates and health care costs in general.

Emergency room physicians, for example, are forced to practice defensive medicine to avoid the threat of lawsuits. "From the ER doctor's perspective, they don't know the patient, and they cannot afford to miss anything," he said. "If you walk into the ER with a headache, you are going to get a CT scan, almost guaranteed. If you walk in with a sore throat, you will probably get a blood test."

That patient's family physician would not order the same test because he or she knows the patient and would therefore order a simple strep test, resulting in a cost of $86 instead of an $850 bill charged by the ER, Eby explained.

"If everyone had a patient-centered medical home with a family doctor who knew who they were and knew their background, I think we would have happy doctors and patients alike," Eby said.