HHS Secretary Says ‘It’s Time for Change’

In part two of Black Enterprise Editor-In-Chief Derek T. Dingle’s exclusive interview with Kathleen Sebelius, the Health and Human Services secretary, discusses how President Barack Obama’s push for healthcare reform would affect small business and healthcare disparities in African American communities.

Black Enterprise: With 40% of small business costs going to healthcare insurance, why would Obama’s plan be beneficial for small business?
Kathleen Sebelius: I’m a believer that small business owners really have the most to gain. They are, as you say, really at risk in the current system. Often with a small number of employees, if one employee has a pre-existing condition, if one is a cancer survivor or has a health condition, their rates skyrocket. And year in and year out, they’ve seen 15%, 20%, 25% increases. It not only hurts the bottom line but I keep talking to business owners who say it also hurts their ability to retain and keep good employees. Because they offer less and less in terms of benefits, employees will go down the street, down the block or across town for health insurance benefits. So they lose employees and don’t make as much money. They’re really at the mercy of private insurers. They’re paying two or three times as much as a large employer for exactly the same benefits. And this [new] system would offer them an affordable option. It would also have tax incentives for small business owners to come into the market and offer employees coverage. If the small business owners have low-income employees, they would be able to put a plan together in which those employees would actually get a subsidy to be able to take up the plan. Often, they may offer a plan but if you’re making just above minimum wage, you may not be able to take up the plan. So there are a whole series of strategies — a better, bigger marketplace, new rules for insurance companies, tax incentives on the employer side, help on the employee side — that would make the current situation, which is breaking their budgets and payrolls, much different as we look forward.

An aspect of the plan is that certain small businesses will be exempt from the employer mandate. What are the requirements for exemption and what are the options for those small businesses to get insurance?
Well, first of all the options are really the new health insurance exchange which would put the small business owners in a much larger pool. I’m a former insurance commissioner and one of the rules of insurance is the larger the group the more negotiating power you have. So if you and your spouse are negotiating on behalf of yourselves and two or three employees, you’re at the

mercy of the insurance company. If on the other hand you’re one of a 50,000-person group, you got a whole different leverage power. Providers, hospital systems, doctors, pharmacies are willing to give discounts for numbers. You send me 50,000 clients and I’ll give you a good deal on the various rates. So the new health insurance exchange would negotiate that on behalf of small business owners; they’d be able to pick and choose from a variety of products, hopefully including a public option but private competitive plans. They’d be in a very different situation. Insurance companies would not be able to dump them out of the market if somebody got sick. To not offer coverage the next year if there is a health condition. To charge older employees four, five, six or seven times as much as younger employees. All that would cease to exist with the new rules.

The small business exemption is slightly different right now in the House and the Senate [versions of the bill] but it would look at the payroll of a small employer. I think right now they’re looking at payrolls under $1million which would really be exempt from the employer mandate that you offer coverage. So they’d have an option to come in, have some tax incentives but they wouldn’t pay a penalty if that still were not an affordable situation.

What about midsize businesses? They go through similar challenges as small companies when it comes to health insurance.
They’d have access to the new health exchange. Depending on the size of their payroll, they may or may not be exempted. So they’d have, as the president said, a shared responsibility. Government would play a role in

helping to subsidize low-income workers. Individuals would have a responsibility to have coverage. And employers would either have some incentives to provide employee coverage or kick in some payment. One of the things that happens right now is some employers voluntarily offer coverage and they’re less competitive than somebody who’s dumping their employees into a public plan or out on the street. We have a real imbalance.

You talk about shared responsibility. An individual mandate is part of the administration’s program. How do you enforce individuals to take health insurance?
The state of Massachusetts is one of the states that actually now has full coverage. And they verify insurance on the tax rolls that people fill out. When you file your taxes, you declare that you have health insurance. We verify the fact that people have auto insurance coverage in order to get a license tag. Young, healthy folks stay out of the market. But as soon as they have a car accident or get diagnosed with a disease then they come into the market so you have only people who are sick using the benefits. The responsibility really is that people need to have coverage day in and day out, anticipating that everybody’s going to have to use it at some time or another, that some may use it more than others but we can’t just have a system where people wait until they have an accident or a tragedy because then it will never survive.

Even with responsibility, there are some who are uninsured. There are disparities in healthcare delivery. How do you deal with disparities in African American communities?

The recent Census data says that a little over 19% of African Americans are uninsured compared to 11% of Caucasians. So there’s a big gap. And I think that the president sees that as part of the moral imperative; that it’s not okay to say that we have 46 million Americans, a majority of color, who don’t have health insurance, who don’t have access to the system. It’s time we step up. We’ve solved the problem for older Americans; everybody over 65 can rely on the fact that they will be eligible for Medicare, that Medicare will be there. But we need to now take care of the rest of the population and make sure that we no longer have this huge gap between people who get good care, get primary care, have a health home, keep in better shape, and folks who have to come in through the doors of an emergency room to access a doctor or the health care their families need. It’s time for a change.

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Further Reading
— Q&A Part 1: HHS’ Sebelius on Healthcare Reform

— Obama Outlines Healthcare Goals Before Congress

— How Healthcare Reform Affects You

— Finding Compromise in a Tough Healthcare Reform Debate

Resources

— www.healthreform.gov

— Senate Finance Committee Proposal

— Republican Reform Plan