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February 24, 2010


Hon. William T. Stachowski (sent to all members of the WNY state delegation)
New York State Senate
918 Legislative Office Bldg.
Albany, NY 12247

Dear Senator Stachowski:

On behalf of the 2,500 employer members of the Buffalo Niagara Partnership, I write in firm opposition to the regulatory approval of health insurance rates, commonly known as “prior approval,” proposed by Governor Paterson. I urge you to oppose this previously failed policy should it come before you.

Year after year, the Partnership’s members identify the high cost of providing health coverage to workers as one of their top concerns and a huge obstacle to job creation. Today, approximately half of New York’s small businesses do not offer coverage to their employees because coverage is too expensive. Consequently our membership is opposed to the prior approval of health insurance rates in favor of targeted reforms that address the actual drivers of health care costs.

Clearly, making health insurance more accessible and affordable is of great importance to our membership. Nevertheless, while the Partnership believes that much can be done to improve our current delivery system, we strongly oppose the proposal to implement prior approval. As demonstrated in various insurance markets nationwide, this proposal could lead to artificially suppressed health insurance premium rates and cause myriad other detrimental consequences not only for our member businesses but all New Yorkers.

New York has been down this road before: previous prior approval policy was detrimental enough that the state legislature – then-Senator Paterson included – voted unanimously to eliminate it. The problems inherent with prior approval have not changed.

While government-imposed price controls over individual and small group health insurance rates could in the short term result in artificial rate stabilization, inhibiting an insurer’s ability to charge an appropriate premium based on actual costs and utilization will make New York vulnerable to undesirable consequences – including wide fluctuations of rates from year to year, potential plan insolvency and forced reductions in investments in technology. Potentially, this could perversely lead to a greater numbers of uninsured, reduced quality of medical care, a decreased incentive for employer cost controls and lost jobs.

A long-standing position of the Partnership is that New York needs to address the true costs of health coverage. Prior approval fails to take into consideration the multiple factors attributable to the rising costs of health insurance premiums, which include: higher pharmaceutical expenses, technological changes in medical procedures and products, tight labor markets for nurses and physicians, expansion of insurance coverage, changes in New York’s aging population, hidden taxes and mandated benefits.

In addition, on top of some of the most uncompetitive broad-based tax rates in the nation, businesses in New York have the cost of “hidden taxes” on health insurance and health care in the form of surcharges passed on to them. These surcharges stand at an estimated $4.2 billion – in fact, since October 2007, these hidden taxes and fees have more than doubled.

While mandates make health insurance more comprehensive, they also make it more expensive. In New York, our ever-growing number of mandated benefits placed on coverage has increased premiums by an estimated 12.2 percent. That’s a $445 per year increase in single coverage and a $1,066 per year additional cost in family premiums.
With tight profit margins and an ever increasing cost of doing business here, New York’s businesses, particularly small business, are extremely vulnerable to the increase cost of health insurance. Mandates and hidden taxes simply add further cost burden.

Regrettably all the Governor’s proposal does is establish rate setting which, if enacted, would have a significant adverse effect on businesses. For example, when rates are not objectively calculated based on actual healthcare costs, politics and public popularity dictate the rates. Subsequently, artificially suppressed rates force health plans to reduce administrative costs relating to investments in new technology and reductions in workforce.  New investments in technology are a primary source of job creation across the State – particularly given the growth of the life sciences industry in the Buffalo Niagara region and statewide.

There is no question, reducing the cost of health care is critical for the viability of New York State’s fragile economy and has increasingly become one of the greatest impediments to business growth and opportunity across the state. However, artificially suppressing premiums through price controls is not the correct course of action. I urge you to oppose any movement toward “prior approval” of health insurance rates.

Sincerely,

Andrew J. Rudnick

cc:     Governor David Paterson