Pennsylvania Association of Nonprofit Organizations
777 East Park Drive, Suite 200, Harrisburg PA 17111 ??Telephone 717-236-8584 Fax 717-236-8767
Impacts of Health Insurance Rates on the Nonprofit Sector
HOUSE REPUBLICAN POLICY COMMITTEE
September 14, 2004
Thank you Mr. Chairman and members of the committee, for providing me an
opportunity to share our sector’s concerns and struggles with rising health insurance costs.
PANO (Pennsylvania Association of Nonprofit Organizations) is the statewide
membership association serving and advancing the charitable nonprofit sector through
leadership, education, advocacy and services in order to improve the quality of life in
Pennsylvania. Approximately 525 organizations are members of PANO, and our public
policy work is done on behalf of the nearly 40,000 purely public charities that operate in
the Commonwealth. I have been asked to discuss the problem in general, and also share
how the availability of adultBasic impacts charities.
The public demands that charities spend a high percentage of their funding on programs,
and the sector attempts to meet this challenge. As the cost of health insurance increases,
several problems arise. More dollars must be allocated towards administrative costs, so
fewer are spent on the mission. As employees bear a larger burden of this expense in an
attempt to offset this effect, the ability to attract and retain quality staff is diminished.
Nonprofit salaries are already generally lower than their for-profit or government
counterparts, so the reduction or elimination of this benefit makes it more difficult for
these employees to continue their good work. Many human service positions pay only
slightly more than the minimum wage, and these employees are unable to share the cost.
The demand for adultBasic is going to increase considerably if these costs continue to
climb. This anecdote reflects a lot of the calls I have been receiving: “Our Health
insurance premiums went from $300 to $450 per employee and the non-profit only pays
$150 of that cost. All of our employees have left the plan except one, and she has a
preexisting condition, which is one of the reasons why the plan is so expensive to begin
with. Health Insurance Costs are reaching crisis levels to most employers, even outside
the non-profit worlds, and our political sector needs to act quickly with some common
sense policy to make health care affordable for those who are seeking good coverage, but
can't afford $300 a month premiums.”
In addition to expanding the availability of adultBasic, it is critical that the 90-day waiting period be reexamined. If you force individuals to allow their insurance to lapse during this period, they may face catastrophic consequences if they require medical attention. Additionally, the only safeguard some individuals have against being denied future health insurance coverage is the maintenance of their existing plan, so this is not a reasonable expectation of those already in need.
There are additional factors driving the need for the expansion of adultBasic. A significant number of charities have no bargaining power when they purchase health insurance for their employees. Those with fewer than 50 employees hit a roadblock and are unable to collectively organize and take advantage of scale and work with insurers. PANO has worked since the turn of the century to develop an association plan after Aetna dropped its small association plan.
Since the state is broken into numerous markets, we are forced to develop plans in each of these regions. I have worked with numerous brokers, including many who have specialized in association plans, but they have been unsuccessful in their efforts. The demographics of nonprofit staffs are not usually attractive to health insurers since this is one of the few fields with a high concentration of female staff and executives. We also have many senior citizens among our ranks.
We are fortunate at this time to be partnering with TRIAD USA and Dewey and Kaye, two consulting firms in Pittsburgh that are receiving funding from the Forbes Fund to try to remedy this problem in Western Pennsylvania. You will find a citation of the Tropman Report study that propelled this collaboration at the end of this testimony. I would like to share this excerpt:
“It is unrealistic to expect nonprofit employers to continue to underwrite such increases. Passing the costs on to employees, however, is not feasible; such a strategy will lead to severe reductions in employees’ take-home pay, especially for those earning the minimum
wage. These reductions would, in turn, likely result in higher levels of employee dissatisfaction and might cause employees to seek work elsewhere, which would be ultimately costly to employers — and to the entire sector. This potential for a downwards
spiral is troubling.”
I am hopeful that we may be more successful in developing a plan since TRIAD USA and Dewey and Kaye have been able to identify over 5500 interested participants. That being said, we will not be able to offer this program in the Western part of the state until at least July2005, and so expansion would probably not commence until 2006. This plan would not solve the problem of low wage workers because it is a consumer driven plan with high deductibles and co-pays for doctor’s visits, most procedures, blood work, etc.
Health savings accounts should help ease the burden for those more financially stable if they are available, but they will not allow those on the fringe to absorb the costs.
We are well aware that this problem impacts everyone, particularly since the clients of our member organizations are often those hardest hit. If the organizations that support those in need (such as job placement services, housing support, food banks, health clinics,
etc) can no longer afford to operate because they have insufficient staff and/or cannot
afford to provide services due to the burden of increased health insurance for staff, than
those in need will be further harmed by this problem. When your constituents donate to
charity, they want their money to go directly to the cause, but the reality is that hard
working individuals need to staff most organizations in order to make that happen.
People need access to affordable health care and at this point most charities have no
bargaining power. Please consider the expansion of adultBasic. This is one part of the
solution as you explore how these spiraling costs can be managed so those with the
greatest need have some options. We greatly appreciate your efforts in investigating and
solving this crisis. Thank you for this opportunity to share our concerns with you. Please
feel free to contact me if you need any additional information.
Jennifer Ross, CIO
“The Insurance Muddle: Addressing Healthcare Costs for Nonprofit Sector Employees.”
The Forbes Fund Tropman Report 2003 Series. Volume 2: Number 7.
“Getting What We Pay For: Low Overhead Limits Nonprofit Effectiveness.” Center on
Nonprofits and Philanthropy, Urban Institute Center on Philanthropy, Indiana University.
Brief No. 3. http://www.urban.org/UploadedPDF/311044_NOCP_3.pdf