The Birmingham Business Journal interviewed Hal Shepherd, President & CEO of The Kennion Group on Friday, July 8, 2011 and asked him about health care reform.
You can read the full Birmingham Business Interview on Alabama Health Care Reform here: http://goo.gl/RWtiZ
Q&A: Hal Shepherd, The Kennion Group
Hal Shepherd, president and CEO of Birmingham-based The Kennion Group advises businesses on health care reform compliance. Shepherd will also be part of the Birmingham Business Journal's Health Care Reform Panel on July 14.
BBJ: How does health care reform rank as an issue for small- to medium-sized businesses?
Shepherd: It ranks in the top five, but not at the top in this order: New business and sales; retention and recruitment of quality, educated employees; overall government regulations, taxes and paperwork; how to make profit with existing business, and cost of my employee benefits, especially if I am mandated to provide additional benefits.
BBJ: What’s the bottom line on this issue?
Shepherd: Most small employers have trouble earning a profit now. As governments impose new rules and regulations, it costs the business money to figure out how to comply. Employers using lower paid workers in their business have zero funds to give employees a raise, much less to pay additional funds for mandated employee benefits. These employers have several choices: Lay off workers and outsource production or services to another country or outside vendor, or invest in automation. Bottom line is the No. 1 issue is there is no money to pay for the cost of a typical health plan. The money has to come from an employer, the employee’s funds or taxes.
BBJ: What are the pros of health care reform?
Shepherd: There are large segments of the U.S. population that do not have a major medical health plan. It is prudent for general society to try and figure out a way to provide health care for those who are not able to do it for themselves.
BBJ: What are the cons?
Shepherd: The reason given for passage was largely focused on the supposed evils of the insurance industry. Major medical maximums were too low (1 percent of claims exceed $100,000 in a given year). Pre-existing conditions were excluded (most group plans ask no health questions and cover these conditions immediately under HIPAA or within a few months). Agents and brokers were paid too much money (commissions and fees are usually in the 5 percent range). The insurance industry made too much profit (most group health plans are 100 percent paid for by the employer with insurance carriers being paid an administrative fee to process claims). People over age 65 or disabled had Medicare. The poor had Medicaid. Women and children had all sorts of state and federal programs in place. There was only a small percentage of the uninsured who actually wanted health care and could pay for it, who could not obtain it (estimates are about 10 percent). A better solution would be for government to cover any citizen who had claims over $100,000, and provide care for the poor and those who could not afford to pay for care. Another interesting statistic is more than 50 percent of the population has claims less than $1,000 per year.
BBJ: Why is this a major concern for small businesses?
Shepherd: They are constantly concerned about navigating the legal and administrative challenges of health care reform. Ninety-six percent of U.S. businesses have less than 50 employees. Of those businesses with more than 50, over 95 percent already offer health insurance coverage to their staff (Wall Street Journal). These businesses are having to navigate through uncharted waters regarding Health Care and Education Reconciliation Act of 2010 (H.R. 4872).
BBJ:As a member of the Alabama Health Exchange Task Force, what issues are you seeing?
Shepherd: Alabama is in a Catch-22 situation. It has to proceed with the current law and implement the various programs called for by the reform legislation. If it refuses, these programs are set to be assumed by the federal government. Initially, states (that cannot run deficits) have been provided funds (borrowed by the federal government) to set up these programs. Eventually, most programs will have to be funded by the states themselves. The state of Alabama is faced with current shortfalls in its health and welfare programs for state workers and teachers. Add to that, the cost of prisons and Medicaid, and other current state cost centers and the impact of the costs of health care for a relatively poor population, which is beyond the capacity of the state to provide.
BBJ: What can we expect with reform?
Shepherd: Part of the equation left out of most discussions is the impact of reform on the health care community, UAB, Children’s and other health systems in the Birmingham area. The “business” of providing health care as a product or service should grow as a larger population is empowered and encouraged to seek care. On the other side, government regulation of the cost of care is expected to more tightly control what providers are actually paid for services. So while the patient population may increase, the payments from the government and private health plans would be expected to decrease. Overall, neither business, government or health care providers can plan for the future since so much of the reform agenda is open for debate. We recommend that you plan for full implementation of the law and be prepared to change to fit what unfolds on a month-to-month basis.