July 11, 2011
Remarks as prepared for delivery
Good morning, and thank you all for being here.
It’s great to have a terrific advocate for America’s small businesses with us, Terry Gardiner of the Small Business Majority. I’m also glad to be joined by three leaders from our department who work every day to improve Americans’ health insurance options: our CMS Administrator Dr. Don Berwick; Steve Larsen, the Director of the Center for Consumer Information and Insurance Oversight within CMS; and Joel Ario, Director of Health Insurance Exchanges also within CMS. And of course, I want to thank our host, Nick Kaplanis, General Manager of Frager’s Hardware, which happens to be my neighborhood hardware store.
Frager’s represents the American Dream. It was founded by Frank Frager, a Russian immigrant, in 1920 with $5,000 in borrowed money. He opened his doors on this very spot, lived above the store, and built a business that was not just about making money but was about contributing to his community. And when the current owners, Ed and John, bought the store from Frank’s sons, they committed to running the business the same way Frank did.
Like so many small business owners across the country, they have made the sacrifices needed to provide affordable health insurance coverage for their employees because they believe it’s the right thing to do. But as they, and millions of other small business owners know, it’s getting harder and harder to do this.
The health insurance market today is broken, especially for small businesses like Frager’s. Small companies pay up to 18 percent more for insurance than the larger chains with which they compete. And small businesses are much more likely to be the victims of huge premium increases or be offered coverage that might exclude care for certain pre-existing conditions like cancer or diabetes.
That’s a big part of the reason why small employers are a third less likely than large companies to offer health benefits to their workers. A small business owner I met in Connecticut put it very simply. He said, “I can afford to pay salaries or I can afford to pay health insurance, but I can’t afford both.” That’s not right. That’s not fair. And in an economy where small businesses create two thirds of jobs, it’s a huge drain on economic growth.
But the marketplace is changing. Already, in the year since the Affordable Care Act was enacted, we’ve seen signs of an increase in the number of small firms offering health benefits after a decade of decline. And this morning, we are announcing another important step that will help put small businesses like Frager’s on equal footing with their competition – as well as helping millions of Americans who buy their own health insurance or are uninsured get affordable coverage.
Today, we are releasing draft guidelines that states will need to follow as they set up Affordable Insurance Exchanges in their state. When these state-based Exchanges are up and running, they’ll form a new health insurance marketplace in which insurance companies will have to compete for business on price and quality. No longer will it be profitable for insurers to cherry pick the healthy workers and leave others on their own. And the individuals who shop for insurance in an Exchange will have the same choices as their elected Members of Congress.
Setting up this new marketplace and getting it right will take time and planning. That’s why it won’t be operating until 2014. But states are already hard at work taking the first steps to building their Exchanges.
This is not a one-size-fits-all solution. Each state will have the flexibility to design its own Exchange. And they’ll also have the option to partner with each other and with our department in order to meet the goals they have for their Exchange. But all Exchanges will have certain key features in common.
First, they will be a one-stop shop where individuals and small business owners will be able to see their private insurance options, compare prices and benefits, and pick the plan that’s right for them and their family or business. If you’re buying your own insurance, you’ll be able to see all your choices in one place just like employees at large companies do today.
Second, they will inject transparency into the insurance market. I saw the power of transparency firsthand when I was Insurance Commissioner of Kansas. When we compiled information about insurance policies and lined them up side by side, insurers were suddenly very reluctant to be the highest priced company.
Third, Exchanges will ensure a basic level of coverage and will prohibit insurers from avoiding sick enrollees and skimping on care. All plans sold in the marketplaces will offer a minimum package of benefits similar to those offered by large employers today, so small businesses and individuals will know that the plan they paid for will be there when they need it.
We have a lot of hard work ahead of us, but the payoff from these changes will be huge. When the Exchanges are up and running, a small business owner or family buying their own insurance will be able to go to a single website, easily compare their options, and pick the one that’s best for them, knowing that they’re getting a quality plan at the best price.
For families, this will mean that buying health insurance is more like buying plane tickets or a home appliance. The consumer will be in the driver’s seat. And for small businesses like Frager’s, it will mean it’s easier to do the right thing and provide health insurance to their employees.
That means small companies will spend less time worrying about health insurance and more time doing what they do best, which is investing in their business and creating jobs.
For too long, small business owners and Americans who buy their own health insurance have had to shop in an inferior health insurance marketplace with higher prices and worse options. Today, we’re taking an important step towards giving them a health insurance marketplace that works.