Health Care Corner:
Got Health Insurance?

Ernst N. Csiszar

“Currently, 13 percent of the state’s population under the age of 65 is uninsured.
Over 8 percent of the state’s entire population has not had health insurance for at least one year.”

Ernst N. Csiszar is President and CEO of Property and Casualty Insurers Association of America. He served as South Carolina’s Insurance Commissioner from 1999 until August 2004.

The issues that we are currently experiencing in the health insurance market are not unique to South Carolina. Nationally, states are struggling with a deterioration of the market—particularly within the small group market. A comprehensive study of our market had not been conducted until the South Carolina Department of Insurance was awarded a State Planning Grant through the U.S. Department of Health and Human Services in 2002. The grant has made it possible for South Carolina to study issues surrounding health insurance, including how to expand insurance coverage and stabilize insurance rates, particularly within the small group market.

The grant project has included the collaboration of many interested parties including the State of South Carolina, the Office of the Governor, the S.C. Department of Health and Human Services, the Office of Research and Statistics of the S.C. Budget and Control Board, the S.C. Small Business Chamber of Commerce, the National Federation of Independent Businesses, the South Carolina Medical Association, the South Carolina Hospital Association, and the South Carolina Managed Care Alliance. For assistance with the data analysis and policy formulation, the project included the formulation of a Health Insurance Policy Advisory Committee (HIPAC), which included representatives from the above-referenced organizations.

The primary focus of the grant has been to gather better and more detailed information on the uninsured population so that state policy initiatives could be formulated to (1) reduce the number of uninsureds by expanding health insurance coverage, and (2) stabilize the market so those who are currently insured don’t lose their insurance coverage. Because we know that most people obtain insurance coverage through their employment, the grant has focused on the small group health insurance market where problems of affordability and uninsurance appear to be more critical.

To have a complete understanding of the issues at hand, it is necessary to provide a demographic sketch of the state.

South Carolina is home to more than 4.1 million people and is the 40th-largest state geographically with 31,055 square miles. The state has 46 counties, 7 metropolitan areas, 267 cities/towns, and 4 major geographic sub-state regions: the Upstate, Pee Dee, Midlands, and Lowcountry.

The age distribution of South Carolinians appears to mirror that of the nation, but we are more racially diverse than the nation as a whole. There are 69 cities/towns with an African-American population of 50 percent or more. The median age in South Carolina is now 35, up from 25 in 1970.

In terms of education, South Carolina ranks 39th in the nation in the percentage of the population with less than a ninth-grade education. In terms of the economy, South Carolinians are employed in manufacturing, construction, retail, hospitality services, and health care services. South Carolina ranks 6th in the nation for the highest percentage of the population employed in the manufacturing industry, with 19.4 percent as compared to 14.1 percent for the entire nation. Twenty-nine percent of the civilian population is employed in management, professional, and related occupations in South Carolina, compared with 33.6 percent of the civilian population nationwide.

Based upon the data collected through numerous mechanisms that included random-digit-dial surveys, mail-out surveys, and one-on-one interviews, we have learned that 19.4 percent of South Carolina’s population is uninsured at any point during the year. Unfortunately, our average is higher than the national average of 15.2 percent. Currently, 13 percent of the state’s population under the age of 65 is uninsured. Over 8 percent of the state’s entire population has not had health insurance for at least one year. South Carolina’s percentage of uninsured whites (18.1 percent) and Hispanics (42.2 percent) is higher than the nation’s, which currently stands at 14.2 percent and 32.4 percent, respectively.

We have learned that 58 percent of South Carolinians have employer-sponsored or individual private coverage; 27 percent have some type of public coverage, such as Medicaid or Medicare; and 13 percent are without any type of insurance coverage at any point in time. Rates of uninsurance vary across the state. The Pee Dee Region (Florence/Myrtle Beach) and the Lowcountry (Charleston) have more uninsured than the state average, while the Upstate (Greenville/Spartanburg/Anderson) and the Midlands (Richland, Lexington) have fewer uninsured compared to the rest of the state.

As mentioned earlier, the grant efforts focused on the small group health insurance market. When one reviews the statistics, it is clear that South Carolina has more small employers (those with 50 or fewer employees) than it has large employers. Since 1994, South Carolina has lost nearly 62,000 manufacturing jobs, which, as a general rule, offer health insurance benefits. These jobs are being replaced by jobs in the service/hospitality industries, which are less likely to provide health insurance. Small employers have the most difficult time offering health insurance to their employees. Fifty-three percent of small employers with 1-10 employees do not offer group-sponsored health insurance to their employees. The percentage drops slightly to 39 percent for small employers employing 11-20 employees that do not offer group-sponsored health benefit plans to their employees. Employees listed affordability as the primary obstacle when asked why they opted not to accept health insurance benefits when offered by their employer. According to responses we received through our surveys, 62 percent of eligible individuals do not enroll in public programs because they do not wish to receive governmental support or do not want the government to provide their health coverage

From its inception, the goal of this study has been to identify both the working uninsured and all other uninsureds. From this information, the HIPAC Committee would then formulate policy options that address the expansion and affordability of the insurance products available to small businesses in South Carolina. The data has shown that the majority of the uninsured are hard-working citizens who simply cannot afford the group or individual health insurance plans that are available to them. We must not overlook that small employers have been seriously affected by the recent economic downturn and, more often than not, are forced to pass more of the costs, co-payments, and deductibles on to their employees. Some small employers have actually dropped coverage altogether.

The following barriers facing the uninsured and the small employer health insurance market were considered while conducting the grant study: affordability, increased cost-sharing for employees, decreased benefit plans, decreased competition, lack of familiarity with public programs available to the working poor, lack of knowledge of small group insurance laws, and an unawareness of the impact that over-utilization of health care systems has on costs.

As the grant study concludes and the findings are documented, policy makers must contemplate South Carolina’s next steps. The South Carolina Department of Insurance, in collaboration with HIPAC, has formulated three policy recommendations. These initiatives are under discussion and are suggested as a point from which to begin and expand. The recommendations are as follows:

• Create a Medicaid Expansion Program for adults working in small businesses. This program would provide a statewide employer coverage option that would cover all employees in a group plan and subsidize the premium for individuals who meet or fall below 150 percent of the federal poverty level.

• Draft appropriate legislation that will allow existing and new nonprofit community-based health care programs to raise necessary funds through prepayment fees. These fees will be used to expand programs, increase participant size, and/or increase provider reimbursement. Because each program is community based, the plan design, fees, and networks will be determined based on community needs.

• Seek funding to develop educational programs that will make South Carolinians more informed health care consumers. These programs should be developed to meet the needs of children, adults, employers, and health care providers.

Over the past three months, the S.C. Department of Insurance has hosted a series of free health benefit fairs throughout the state. These events have offered small business employers and employees an opportunity to learn more about employee health benefits and other health coverage initiatives. Representatives from public programs, state and local agencies, HMOs, and insurance companies were on-site to answer questions and provide information. Presentations and information concerning health care cost savings, consumer-driven health plans, and supplemental products, as well as other alternative products for small employers, were provided.

A final report that will include all of the grant’s findings was submitted to Governor Mark Sanford and members of the South Carolina General Assembly in late August. The report will then be forwarded to the U.S. Secretary of Health and Human Services, Tommy Thompson. o