Health Care Costs are Everyone’s Concern

Suddenly, everyone is concerned about the cost of health insurance. Massachusetts municipalities are raising taxes, cutting services, and even contemplating bankruptcy because of the cost of employees’ coverage. The Commonwealth’s financial reports must soon reflect a $13 billion item for retiree health benefits, hitherto left off the books. Non-profit agencies are realizing that the new health insurance mandate applies to their employees, too. The state’s Health Care Connector Board is struggling to devise an ‘affordable’ health plan, in the face of protests about cost from future customers.

To which those in the business community can only say: “Welcome aboard.”

Employer-sponsored health insurance covers almost three-quarters of the non-elderly population of Massachusetts, and the rapid rise in insurance costs — at a rate that outpaces general inflation by a 3-to-1 margin, averaging 8.6% annually — has long been a principal issue for business owners. The high cost of health insurance, currently averaging $4,147 per year for individual coverage and $11,504 for a family plan, threatens the survival of ‘legacy’ companies (think of the automobile and airline industries) and is a major deterrent to the creation of new industries and jobs, particularly lower-skilled and entry-level positions.

If Massachusetts is serious about leading the nation on health care reform, we must expend as much effort on decreasing cost as on increasing access. The state’s new health insurance law does not take on costs directly, but by extending insurance coverage to every citizen it lays important groundwork for further steps. The individual mandate and concomitant employer responsibilities should eliminate “free riders” from the system, those who can afford health insurance but choose to go without. Fairer funding of free care provided by hospitals will reduce cost shifting and improve transparency. The anomalous tax treatment of health insurance is partially addressed. And, as we are seeing, the new law is giving the cost issue more public visibility.

It is a real, serious issue, and it is an issue for everyone. Those 8.6% average increases, with spurts into double digits, play havoc with the budgets of cities, states, non-profits, and households, as well as the budgets of businesses. There are things we ought not do to control cost, such as rationing — but there are things we can do, ranging from developing a rational health care delivery system with properly aligned incentives, transparency, and electronic medical records to tiered networks which encourage consumers to seek medical care in the most cost-effective settings.

At the Associated Industries of Massachusetts, where virtually all of our members provide the benefit, health care costs have been the number-one concern over the past 15 years. We are convening a group of the state’s leading employers to focus on cost containment, and we look forward to working with health care providers, hospitals, doctors, nurses, pharmaceutical companies, medical device companies, insurers, public officials, and fellow employers toward finding solutions. Failure to get this issue resolved has serious consequences, not just for the recently passed law, but also for our economic future and the well-being of our Commonwealth.

Thomas Wroe Jr. is chairman of the Associated Industries of Massachusetts, and chief executive officer of Sensata Technologies Inc. in Attleboro.