Opponent Testimony To HB 33
House Insurance Committee

Presented by
Jenny Baader
Vice-President
Baader Brown Manufacturing Company
4220 Springfield-Jamestown Road
Springfield, Ohio 45502
(937) 323-6017
May 20, 2003

Chairman Smith and members of the House Insurance Committee, thank you for the opportunity to testify today. My name is Jenny Baader, and I am the Vice-President of Baader Brown Manufacturing Company, which is located in Springfield, Ohio.

I currently serve on the Health Care Committee of the Ohio Chamber of Commerce, and am an active member of the Leadership Council, for the Ohio National Federation of Independent Business (Ohio/NFIB).

I am here to testify on behalf of the Ohio Chamber in opposition to HB 33 which, if enacted into law, would mandate additional benefits that employers would be required to provide to their employees in health care plans.

My background is that of a Registered Nurse, and therefore I understand and appreciate the good intentions, and compassion that motivated Representative Olman and the co-sponsors to introduce this bill. However, as the vice-president of a small family business, I am highly concerned with the increased cost that will accompany the passage of any newly mandated benefits, and the subsequent effect they will have on employers’ continued ability to offer health care benefits to their employees.

As a nursing student, I remember that during our Psychiatric Rotation, my instructor admonished the class to always vote for any legislation that would improve mental health services. Her reasoning was that while there are drugs to deal effectively with physical pain, mental pain is much more difficult to treat. While I sympathize with these sentiments, now I also realize that the intended positive outcomes that might be realized by mandating legislation to provide for increased mental health services, could inversely have the devastating effect of increasing the rolls of the uninsured. This would occur because the increased cost of funding additional mandates would cause more employers to cease offering health insurance to their employees.

Realistically, as a society, we must accept the fact that employer-sponsored health plans will never be able to offer coverage for every malady that presents itself. While a mandate may assist a certain segment of the population, there will always be others whose illness or disability falls short of coverage. Currently, there are a wide variety of mental health services available to assist individuals whether or not the individual is covered by insurance. Many counselors and treatment centers operate on a sliding fee scale to enable clients to avail themselves of such services, while at the same time charging them a fee that is within their means. Reality dictates that inversely, there are no programs that provide sliding scale health insurance coverage for the uninsured.

I do not in any way mean to imply that there is not a financial burden placed on the person who has need of paying for mental health services. Many families live paycheck to paycheck, and any additional drain on their financial resources is difficult to bear. However, I feel strongly that somewhere along the line, personal responsibility is essential, not only for an individual to realize some form of recovery, but also to ensure the viability of health insurance offerings for others.

Currently 43 million Americans are uninsured, and the Lewin Group has concluded that for every 1% increase in health care premium costs, an additional 200,000 - 400,000 uninsured will be added to that number. It is sad to note that 62% of those represented in the statistics are not elderly or unemployed, but are working individuals who either can’t afford their share of a health insurance premium, or are employed by an entity that is unable or has chosen not to offer health care benefits to its employees.

Approximately 64.2% of Americans are covered by employer-sponsored health insurance programs, with a majority of employers providing a significant portion of the premium. Recent studies indicate that in 1997, $1 Trillion (or 14% of our Gross National Product) was spent on health care costs. It is expected that by 2007, health care costs will double to approximately $2 Trillion.

I come before you today to respectfully request that you weigh the benefits of mandated coverage against the very real ramifications to small businesses when the premiums rise in order to fund newly enacted legislation. Currently in Ohio, 25% of the total health insurance premium fee is a direct reflection of the funding required to finance the almost 30 state mandated benefits that are already required by state law. In 1999, companies and individuals spent $11.2 billion on health insurance premiums, out of which 2.8 billion was required to fund the mandates required by Ohio law.

As you are aware, employers are not required to offer health insurance to their employees, but we do so voluntarily in order to attract and retain qualified workers. Several decades ago when employers initially began offering health insurance as an added incentive to attract workers, the benefit was considered a fringe benefit. Today, those seeking employment are not only interested in this benefit, they expect health coverage to be included and many times base their decision on where to work not only on the salary offered but also the scope of the health insurance package available.

By way of background, Baader Brown Manufacturing produces the lights, flashers, fans, and electrical harness work for school buses and ambulances. The company began 49 years ago in my father-in-law’s garage, and our story is truly the realization of the “American Dream”. One of our original employees retired at the age of 92, after providing 40 years of dedicated service, and we have several other employees who have been with us for more than 25 years. Our employees are not just a “number” or merely “workers”, they are our extended family. We have laughed together, cried together, shared the joy at the birth of new family members, and stood with them as they buried their loved ones.

We strongly care about the health and well-being of our employees and their families, and therefore, when we review our health care benefit package every year, we strive to provide the most comprehensive coverage that we are able to afford. I wish that it was possible to provide all-inclusive coverage that would take care of any possible malady that someone might incur, and when it came time to pay the premium, we would merely open our coffers and, like the Doritos’s ad, state, “take all you want . . . we’ll make more . . .”. Unfortunately, reality dictates that we have a finite pot of money within which to operate and, therefore, we must choose the best possible coverage with the limited dollars that are available.

As a small business, Baader Brown strives to provide the best, most comprehensive coverage for our employees while striking a balance with premiums that we can afford. Although a given mandate may provide relief for a certain segment of the population, it in turn causes an increase in the employers overall premium. Unfortunately, when our renewal date arrives, the fallout from those increases may force us to negotiate a reduction in previously covered benefits, many of which our employees value and expect, in order to comply with a mandate that they may or may not avail themselves of.

Due to the burden that health care insurance premiums placed on our business, Baader Brown reluctantly instituted a policy that the company would pay 65% of the monthly premium, and the remaining 35% became the responsibility of the employee. During the year 2002, Baader Brown was billed in excess of $45,000 to provide coverage for an average of 12 employees who take advantage of this benefit.

One gentleman in our organization, who has chosen to participate in the family plan, pays $45.19 weekly for coverage. Although he has chosen to take advantage of the “Cafeteria Plan” which allows for his premium to be deducted from pre-tax dollars, his deduction is in excess of 15% of his gross weekly earnings.

Other employees have declined to enroll in the program, stating they can’t afford the cost, and sadly, having no other means of health coverage, they have joined the ever-increasing rolls of the uninsured. In January, we were informed that our rates for the year 2003 would be increasing by 26%. In addition to our yearly increase, we are also being rated by employee ages, due to insuring fewer than 15 individuals. This causes a great disparity in cost for our employees as a 60 year-old female is billed at $174.88 per month ($14.13 per week employee deduction), but a 60 year-old male is billed at $636.03 per month ($51.38 per week employee deduction). Both of these individuals are healthy.

I am cognizant of the fact that the passage of legislation for a singular mandate will not cause the cessation of health insurance programs in Ohio. However, I am also very aware that there are a multitude of mandates that have already been proposed both in the House and the Senate, while others are on the horizon and will be proposed during the coming year.

In addition to my concerns regarding the high costs of health insurance mandates, I am also concerned that government mandates like HB33 place the self-employed and small employers at a distinct disadvantage in the marketplace. As a result of federal legislation, the Employment Retirement Income Security Act (ERISA), unions and large employers who are able to self-insure are exempt from any state mandate. As a result, HB33 only impacts 25-30% of Ohioans, and the costs of such mandates are placed solely on the backs of individuals and small employers which are the least able to absorb any increases in premiums.

As you are all well aware, the economy is extremely depressed currently, and like you, we have had to make some very difficult fiscal decisions in order to remain viable. Although not the intention of the legislation, HB33 would create an even greater financial burden by restricting a small employer’s ability to tailor a benefit package that meets their employee’s needs. A mandated benefit does not increase the employee benefits “pie”, rather, it merely redirects the available benefit dollars away from benefits the employee may actually want or need.

We urge the members of the General Assembly to change their focus away from mandating benefits and toward helping to ensure strong competition in the market-place which will control costs and provide greater access to insurance for Ohioans. Regretfully, we oppose this legislation that unfairly discriminates against small business owners, and places them at a competitive disadvantage, and urge this committee to reject its passage.

Thank you for your time and consideration of my position. I would be glad to entertain any questions that you or your committee may have at this time.