UP FRONT
by Janet Trautwein
CEO and Executive Vice President, NAHU
Ways to Reduce the Cost of
Health Insurance
In lieu of my usual column, this month you’ll find testimony I
presented at an April 23rd hearing of the Committee on Education
and Labor’s Health, Employment, Labor and Pensions Subcommittee. We were asked to testify because members of Congress
know that we provide real-world insight into how health insurance
is provided. Please read this testimony (which you can also find on
www.nahu.org). Thank you!
Good morning. My name is Janet Trautwein, and I am
the CEO of the National Association of Health
Underwriters (NAHU). NAHU is the leading professional
trade association for health insurance agents, brokers and
consultants, representing more than 20,000 employee
benefit specialists nationally. Our members oversee the
health insurance plans of millions of Americans and work
on a daily basis to help employers purchase, design and
implement health plans for their employees. We appreciate
the opportunity to be here today to share our thoughts on
ways to make health insurance coverage more affordable
for both employers and their employees.
We believe all Americans deserve a health care system
that delivers both world-class medical care and financial
security. Americans deserve a system that is responsible,
accessible and affordable. This system should boost the
health of our people and should improve rather than drain
our country’s economy.
NAHU believes that any reform proposal should build
on the strengths of our current system, which centers on
employer-sponsored coverage. Our support for the
employer-based system is well-founded, as this system
efficiently combines key elements that make health care
accessible to individuals and families all over America by
providing the financing to pay for health care services.
Benefits of Employer-Sponsored Coverage
The federal government supports employer-sponsored
coverage through the Tax Code by recognizing health
insurance premiums paid by employers on behalf of their
workers as a business cost, which are generally deductible
by the employer for tax purposes. These same premium
payments by employers are currently not taxable to
employees as a part of their compensation. NAHU believes
the preservation of this current federal employer deduction
and employee exclusion is critical to the success of any
health reform effort.
For working individuals, there are a multitude of
advantages to employer-sponsored coverage, not the least
of which is the significant contribution most employers
make toward the cost of coverage for employees and their
dependents. The average employee receives an 84% subsidy
from his employer toward the cost of coverage, regardless
of income. This subsidy—on average—has remained
constant over time even though health care costs have
increased substantially. This high level of subsidy results in
a very high “take up” of coverage by employees. Without
the funding provided through employers, many people
who have coverage today would be uninsured.
Employers provide coverage to their employees for an
important business reason: to attract and retain the best
employees. Even the smallest of employers that struggle
with the cost of coverage want to be able to distinguish
themselves from their competitors by being known as a
great place to work with comprehensive benefits. When
designing health care solutions, we need to make sure we
preserve the employer’s connection to their plan and the
funding that goes along with it for their employees.
For larger employers, group purchasing power helps
them obtain preferential pricing and enables them to
provide benefits that are generally more extensive than
what is available to consumers spending a similar amount
in the individual market. Administrative costs are also
lower than in the individual market because coverage is
provided to many individuals through a single transaction
with one employer.
With any size of employer plan, controlled entry into
the plan at the time of hire ensures that those entering
employer sponsored plans are doing so as a result of their
employment rather than as a result of their believing they
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