House Majority Policy Committee

House Majority Policy Committee Hearing

 Testimony of Robert Phillips, CEO of the Pocono Mountains Chamber of Commerce

March 28, 2007

Good morning everyone. My name is Robert Phillips. I am the President/CEO of the Pocono Mountains Chamber of Commerce which represents over 1,900 members. A few years ago, our Chamber created a Health Care Task Force to study and make recommendations to our members concerning raising health care costs.

While healthcare is neither affordable nor accessible to a number of people in PA, it must be noted that PA has historically had lower percentages of people lacking insurance. Despite the fact that the rate of uninsured people had risen between 1987 and 2000, PA had one of the lowest rates of uninsured in the nation at just fewer than 8 percent, which was below the national average. The number of uninsured Pennsylvanians is steadily on the rise, and so are insurance premiums. In 2005, premiums rose 12.7 percent and it is projected that a 22 percent increase will be seen by the end of this year.

There are several factors that experts presented to the healthcare task force that have led to the increases in healthcare costs and insurance costs. First, the difference between the two must be noted, and then it can be discussed why they have both been steadily increasing.

Healthcare costs are not insurance costs, but costs for services and supplies used to provide healthcare. It is suggested that costs are rising for the following reasons:

  • New technology is increasingly more expensive
  • Healthcare workers' wages have gone up
  • Taxes have increased
  • Lawsuits have caused a significant increase in liability insurance premiums for providers, increasing the cost to do business
  • The age of the population has increased and geriatric care is more costly
  • A shifting from inpatient care to outpatient care (this care is typically more costly).

Health insurance costs are those costs for insurance premiums paid in order to receive coverage. It is suggested that these costs have increased for the following reasons.

  • Doctor and hospital fees are increasing due to increased healthcare costs
  • Utilization has continued to rise
  • Federal and state insurance mandates have resulted in more required coverage.
  • Longevity has increased, which has expanded claim volume.
  • The number of citizens currently older than 65 is more than 35 million.
  • Supply and demand is always working. Fewer insurance companies are active today than six years ago, and so competition has decreased.
  • Cost shifting: when government programs pay only 50-60 percent of the cost of an office visit or hospital stay, the providers must shift the cost to non governmental policy holders, causing increased premiums for non-governmental plans.

The issue of healthcare coverage and affordability is a concern for many businesses of all sizes across the nation. Costs of healthcare insurance continue to rise into double-digit increases over the past three years and into the near future. Both the United States Chamber of Commerce and the Pennsylvania Chamber of Commerce support access to affordable and effective healthcare for American businesses.

Small and the self-employed businesses are mainly affected by the healthcare crisis. Many employers of small businesses are forced to shop for affordable, alternative health plans or drop the current healthcare coverage for employees and their families due to the increasing costs. By offering minimal or no health benefits at all, businesses become less attractive for potential, qualified employees, as well as less competitive in a tough job market.

As of September, the Chambers of Commerce, the U.S. Census Bureau and others have conducted several summits, annual surveys, and studies. Overwhelming statistics from this research portray the strong need for healthcare reformation. Top business leaders collaboratively brainstormed ideas and suggestions in attempt to solve the excessive cost increases step by step.

President Bush developed a 2004 budget plan focusing on key ideas such as tax-free health credits, purchasing pools, and advanced savings accounts to reduce the number of uninsured Americans. The United States Department of Health and Human Services Secretary Tommy Thompson urges Congress to enforce President Bush's proposals, which would cover millions of uninsured families. In January of 2003, Pennsylvania Governor Edward Rendell created a Cabinet of expert members to comprise the Office of Health Care Reform in an effort to analyze and solve current healthcare issues.

At the Health Care Task Force meeting, speakers presented various summaries and recommendations based on continuous rising healthcare costs. One topic discussed was the "Emerging Trends in Healthcare – Current Challenges Facing Industry." Certain expert suggestions were given as alternate solutions to alleviate the burden of high premium healthcare costs for small business owners. A few examples of possible solutions are:

  • More competition on a statewide basis rather than territory limitations of insurance companies would lower costs for consumers.
  • There is a need to increase efficiency overall, such as improvements of organizational aspects.
  • Utilizing the self-funding approach with the ability of cost sharing containing higher deductibles.
  • More incentives for wellness programs and preventative measures could reduce costs.

The Pocono Mountains Chamber of Commerce supports a healthcare system, which:

  • Provides necessary, appropriate, accessible and effective healthcare to employers and employees at a reasonable cost.

  • Is affordable, appropriate and effective. Healthcare must be readily accessible to employers and employees.

  • Healthcare costs must be cost effective and provide quality treatment
  • PA businesses need the General Assembly to enact healthcare legislation that will create a system based on free market concepts – emphasizing both quality and cost management.

  • Rising healthcare costs interfere with the ability of the business community to maintain existing jobs and create new jobs.

The Pocono Mountains Chamber of Commerce supports a healthcare system that provides necessary, appropriate, accessible, and effective healthcare to employers and employees at reasonable costs. Affordable, appropriate, and effective healthcare must be readily accessible to employers and employees.

Additionally, the Chamber feels that rising healthcare costs interfere with the ability of businesses to maintain existing jobs as well as create new job opportunities. A future outlook predicts double-digit health insurance premiums to continue.

The Chamber opposes government mandates because no empirical data has been presented showing that the benefits of a mandate exceed its cost. Mainly, mandates do not apply to employees who receive healthcare benefits from an employer's self-insurance plan, nor would they cover the uninsured.

Healthcare must be cost-effective and provide quality treatment. Pennsylvania businesses need a healthcare system that is based on free-market concepts and emphasizes both quality of care and cost management.

Possible Reform Solutions
In an attempt to moderate future insurance premium increases, the elimination of excessive and/or unnecessary costs by insurers and providers is a necessary first step.

Competition is strongly needed among health insurance companies and healthcare providers, in order to allow market forces to control/moderate increases in premiums. Competition also enables employers and employees to choose from a variety of health plans, and make a selection based on a customized health plan that provides a desirable level of coverage at an affordable price.

Increasing healthcare costs is the number one concern of businesses and individuals nationwide. Results demonstrated that 21 percent feel it is a top business issue to be addressed by the Chamber.

Educating the Public
In order to educate the public in PA, those involved must align with local and regional media and news stations. It is important for PMCC as the model chamber to continue the information exchange and education process and form liaisons with other regional chambers on what they have learned themselves thus far, what the chamber and governor of the state are doing, what other states have done, in order to give them the proper background needed to make well informed decisions and to contact the right people to make sure changes are made to benefit the business community. It is also important to educate the employer and employee.

It is recommended that PMCC take the leadership role of finding channels of communicating to its members the actions taken, issues at hand, and course to follow to help reduce this crisis affecting area businesses.