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Olympia Snowe

The SHOP Act: Achieving Affordable Health Care for Small Businesses
By Senator Olympia J. Snowe
May 16, 2009 - 3:37:07 PM

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As I travel across our state and listen to the concerns of Mainers, time and again it's the exorbitant cost of health care coverage for small businesses owners and their employees that causes financial strain for Main Street. Throughout America, health insurance premiums have increased by a staggering 89 percent since 2000 – far outpacing inflation and wage gains. In Maine, the annual premium for the most heavily subscribed policy in the small group insurance market is $5,400 for individual coverage, and over $16,000 for a family plan.

Consider Maine's many independent commercial fishermen who struggle to attain health insurance for their families. According to data compiled by the Maine Lobstermen's Association, in 2006, the average lobsterman's profit-after paying for bait, fuel, fishing gear, and other business expenses-was $21-$31,000. Thus, for that individual to purchase the most heavily used family plan in Maine's small group insurance market, it would absorb 50 to 75 percent of his or her annual income. Participants in other fisheries face similar dilemmas, as do small business owners across the state and nation. This trend is unacceptable and unsustainable.

In order to make health insurance more affordable and accessible for small businesses and the self-employed – who represent a majority of our nation's uninsured- I introduced the "Small Business Health Options Program Act of 2009" or the "SHOP Act" with my colleagues, Senator Dick Durbin (D-IL) and Senator Blanche Lincoln (D-Ark.). This landmark, bipartisan measure would encourage the development of state-based purchasing pools backstopped by a voluntary, nationwide small business risk pool.

The SHOP Act maintains the basic premise of allowing small businesses and the self-employed to pool together, across state lines – just as larger employers are able to do – to secure quality coverage that's more affordable thanks to a reduction in administrative costs, which today account for an astonishing 25 percent of small business premiums -- compared to just 10 percent for large employers.

The sad truth remains that small group insurance markets continue to lack real competition among insurers. No competition means fewer coverage choices. Fewer coverage choices means higher costs, and higher costs translate to no health insurance. And on this one seminal point we can all agree: We need more insured in America, not fewer.

The creation of these purchasing pools will increase competition among insurers and provide more coverage choices for small businesses. And that's all the more critical as small group insurance markets -- like those in Maine – currently have no real competition. This past March, the Government Accountability Office (GAO) released a report that I requested, along with Senators Bond, Durbin, and Lincoln. The GAO's report highlights an alarming trend of consolidation in the state small group insurance markets. The combined market share of the five largest carriers represented 75 percent or more in 34 of 39 states surveyed, compared to 26 states in 2005, and 90 percent or more in 23 of these states, including Maine.

Moreover, under the SHOP Act, business and trade associations would serve as health plan "navigators," helping employers and employees alike with enrollment in health insurance plans, and in responding to questions and distributing information about SHOP.  And to assist small employers who offer health insurance, we provide a targeted tax credit of up to $1,000 for each covered employee, and $2,000 for family coverage – with a bonus credit for employers who contribute more than 60 percent of the premium -- encouraging our nation's smallest businesses to offer health insurance for their employees as a workplace benefit.

The SHOP Act blends the best of tried approaches and address the major concerns critics have expressed, in a package that a broad array of stakeholders from across the spectrum strongly support – including, the National Federation of Independent Businesses, the National Association of Realtors, the Service Employees International Union, Families USA, the National Partnership for Women and Families, and the National Restaurant Association.

As health care costs continue to skyrocket, fewer and fewer small businesses in Maine and across the country are able offer quality health insurance as a workplace benefit. This legislation will finally level the playing field for American small businesses and the self-employed and allow them to pool together nationally to receive a host of new, affordable, and quality coverage options. I firmly believe that the health insurance market reform and coverage policies in the SHOP act must be included in broader health reform legislation.


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