Copyright 1999 Federal Document Clearing House, Inc.
Federal Document Clearing House Congressional Testimony
June 11, 1999
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 2195 words
HEADLINE:
TESTIMONY June 11, 1999 SAL RISALVATO HOUSE EDUCATION AND THE
WORKFORCE EMPLOYER-EMPLOYEE RELATIONS HEALTH CARE COSTS AND UNINSURED PATIENTS
BODY:
Statement of SAL RISALVATO OWNER RIVERDALE
TEXACO RIVERDALE, NJ On behalf of the National Federation of Independent
Business (NFIB) Subject:The Increasing Cost of Health Insurance for Small
Businesses Before:House Education and the Workforce Committee Employer/Employee
Relations Subcommittee Date:June 11, 1999 Good morning Mr. Chairman, and members
of the committee. Thank you for inviting me here today, so I may explain to you
the difficulty experienced by small business owners who want to provide health
care benefits for their employees. I plan to give you my personal history in the
health care marketplace. Also, I would like you to know that I have been
involved in this issue since 1986, and have had many other small business owners
share their experiences with me. The organization I have shared these
experiences with is the one organization that truly has the best interests of
small employers and the American public at heart. The NFIB has always fought to
help small employers find ways to afford to provide health care
coverage for their employees. This is an effort that continues
today, and remains a top concern of those that own their own business and employ
most of the workers in our country. I am sure that all members of this committee
recognize that small business employs most of the workforce in the United
States. There is not a lot of need to go through all of the statistics and
fanfare about how small business is the engine that drives our economy. Congress
has for years recognized the importance of small business to our economy. I only
wish Congress would act as if small business is important, and not just say
small business is important. If we solve the problem small business has of
trying to pay for the health care benefits of their employees, we will solve
much of the problem with uninsured Americans. Bigger business cannot be looked
to as a means to solve this problem. Big business increases their profits by
eliminating workers. Small business increases profits by expanding markets, and
hiring workers. Yesterday, Proctor and Gamble announced the elimination of
15,000 jobs. Where will those 15,000 people find work? Most likely they will
either find employment with a small firm that is growing and expanding, or will
start their own enterprise. They will start out like most of us, as a one-man
band, that grows, expands, and hires other workers that are discarded from big
corporations. These one man bands and their few employees will need health
benefits. Since they will be in a different situation and a different market
than they were used to at Proctor and, Gamble, they will be faced with making
the decision of whether or not to have health care coverage. We
as a nation and you in Congress need to provide as many incentives as possible
while removing roadblocks that get in the way of offering affordable
coverage. I started in business when I was 18 years old. I
started with a small landscape company, and after a few years moved on to the
automotive business. I have owned a service station in New Jersey for 21 years,
2 months and 8 days. I have been a staunch supporter of the free enterprise
system, and have never held a job for anyone else but myself. I have utilized
all of the tools of the capitalist system available to me to compete for both
customers and employees. One of the tools I have used since 1983 to compete for
employees is to provide health care benefits. I have provided these benefits for
my full time workers since then, and have even chosen to pay for them entirely.
To this day I have never deducted a penny from an employee for health care
benefits. I am very proud of that. Please understand, however, this has not been
easy to accomplish. By 1986, sharp rises in cost made me reconsider the wisdom
of my three- year-old decision. I had already begun questioning the wisdom after
the first year of providing health care benefits when I learned from my
accountant I was not permitted to deduct the portion of the premium that I had
paid for my own coverage. Of course I did not learn-about this
until-it Was time to file a tax return. I had never even considered a ridiculous
tax policy like that could exist. Common sense told me it was an expense and
that I should deduct it. Unfortunately, not all tax law requires common sense, I
started to get angry and vocal about the sharp increase in premiums I had
received. I was confused why something so important was not more competitive and
affordable. I was receiving similar complaints from other small business owners.
My industry still was not in tune to providing these benefits, which was the
reason I started to provide them in the first place. I was providing something
that my competition was not. Initially, providing this benefit was less
expensive than providing a pay increase. In fact, businesses large and small
utilized this tool as an added means of rewarding and compensating employees.
This actually started the problem of rising costs, because Americans began
receiving unlimited amounts of health care but were not directly paying for it.
When more policies began giving benefits such as prescription
coverage and eyeglass coverage under
fee-for-service plans, premiums began to rise as there was no control on the
final cost. The consumer, or in this case the patient, many times did not even
know the cost of the final bill. Nor did they care to know. The patient paid
their deductible, which was at that time usually very low and off they went.
When one pays $250 for a service or product that could have a final price tag
worth thousands of dollars, one may feel that one received one heck of a
bargain. With the end user having little if any responsibility to control these
costs, an upward and uncontrollable escalation of premiums resulted. Since
insurance companies were obligated to pay the claims, provider fees escalated.
The cost to provide medical services ballooned. As long as fees were billed at
what was then known as "usual and customary" the insurance company was obligated
to pay. Reflecting on this process, I believe the term "usual and customary" was
nothing more than legalized price fixing. Without anything in place to make the
market work in both the providing of health care, and the access to health care
coverage, premiums continued to rise at a rate much higher than
the rate of inflation. In many instances rate increases were 15% to 20% per
year, every year. Of course, with premium increases like that employers reacted
in many different ways. Many opted to drop coverage, while many
opted to decrease coverage by increasing deductibles and
eliminating services and procedures covered under the policy. Still, many opted
to either start requiring employees to contribute all or a percentage of the
premium, or increased the percentage the employee was already paying. This did,
however, start to get the: attention of all Americans. When employees started
paying the cost of health insurance and also higher deductibles, they began
playing the role of an educated consumer, not just a patient. The debate began,
with employees blaming employers, and- employers blaming insurance providers,
and insurance providers blaming medical providers, and medical providers blaming
lawyers, and everyone blaming the government. By the time 1991 rolled around I
had considered dropping health benefits every year I had been, in business,
simply because could not afford. coverage. In fact, on April 30
1992, 1 testified- before this committee when it was then under a different
committee title and different leadership, and talked-about-the dilemma my
colleagues and I were facing.- I asked this committee to consider reforms that
would create incentives to, help drive down the cost of health care premiums. I
asked for nothing more than reforms that follow the guidelines and principles
that have made every other American product and- service the best on earth with
the best and most competitive price. Those principles were market based and free
enterprise based, and sought to remove the shackles of government. The day after
I testified before this committee, I returned to my office only to find that
while I was in Washington D.C. the mailman had delivered a notice from my health
insurance carrier that my premium would be increased 30%. Oh how I wished that
notice had arrived one day earlier. Even though the national debate had started,
and was a focal point of political topics during the 1992 presidential election,
small business was still faced with the high cost of providing health care
coverage for their employees. The amount of Americans that are
uninsured has risen from 30 million to 43 million. A large part of the cost
increase has resulted from Americans with insurance coverage
paying the health care cost of those Americans without health insurance. Since
most uninsured Americans are employed by small business, it is imperative to
find solutions that help small business provide coverage.
Please take note that I said "help" and not "require". I will address that issue
later. Not all the historical news regarding health care premiums is bad. Let's
point out the good with the bad. After the nation had the heated debate in 1994,
and breathed a collective sigh of relief when the Clinton Health Care Plan was
defeated, the newly found consumer awareness pertaining to health care costs
helped to slow the rise in medical inflation. In fact medical costs for the
first time in over a decade grew at about 5%, much closer to the rate of
inflation. My own personal experience was better than that. I received a premium
decrease that equaled 15% (although still 15% above the 1991 level). I had
modest if any increases for 1996 and 1997. But the premium monster is back. I
have had increases of 20% each of the last two years. So now I am back to
switching insurance companies, lowering coverage, and
considering an employee contribution. Since only a few of the reforms the small
business community has been asking for have been implemented, I am back before
you asking you to please keep your eye on the again rising health care premiums,
and to please make the reforms needed in: order to drive down cost. A frequently
discussed issue that I am often asked about is the deductibility of health care
premiums. Many small business owners are puzzled by the fact they cannot deduct
100% of the premium that they pay for themselves. Like I said earlier, I did not
know of this unfair policy when I started to provide coverage.
I honestly still do not know if I would have provided coverage
if I had known in, advance and, in fact, probably would not have. , -1 often
wonder, "how many employers are discouraged from providing benefits because of
this unfair tax policy' Yes, I thank Congress -for changing the policy and
phasing in a 100% deduction. No, I do not think it is fair to wait until 2003.
Nor do I think it will be an incentive to small business owners to start
providing coverage for their workers unless we phase it in now.
- : By supporting Association Health Plans (AHPs), small business owners will
have access to health care markets unavailable to them now. AHPs, will give
small business owners the freedom to design more affordable benefit options, and
offer workers more choices. Allowing small business to band together across
state lines to purchase health insurance will allow them to enjoy the same
economies of scale now realized by big business. Group purchasing is always
better than individual purchasing. Congress can help keep premiums from rising
by opposing any new mandates that would require employers to pay for
coverage like substance abuse, contraceptive
and reproductive procedures, and certain cosmetic procedures. Mandates of any
kind only add to the cost of health care premiums. Certainly any mandates that
require employers to provide coverage will be serious. By
mandating coverage you take away the small business owner's
freedom, you eliminate his choice. There are many times a small business owner
is faced with making important decisions about which bill to pay first. If
health care were mandatory, many small businesses would be faced with not being
able to pay expenses that are critical to the overall operation, like rent, and
utilities. If Congress were to support reform that encourages small business
owners to provide coverage, the result would be more Americans
receiving coverage. The more Americans covered, the lower,
costs will go down. The more costs go down, the more small business will be able
to afford to provide coverage. When more small businesses can
afford to provide health care coverage, the more small business
will have the necessary tools to attract and maintain quality workers. The
spiral will finally turn in the opposite direction. Please help me to continue
providing health care benefits for my employees, and please help my small
business colleagues that do not currently provide coverage to
be better able to do so. Thank you again, for allowing. me the opportunity to
testify here today. I will be happy to answer any questions you may have.
LOAD-DATE: June 15, 1999