Health Care Premiums Blast Off
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Small firms are bearing the brunt of health care increases. Here´s how to fight back.
May 1, 2001
Fortune Small Business 500
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by Sheryl Nance-Nash
The health care beast just won't die. While large and small businesses enjoyed relatively flat health insurance costs in recent years, that beast is beginning to growl -- especially at small businesses.
A lot of owners can't believe how high their premium renewal rates have risen. Increases of 20% are common, says Karen Kerrigan, president of the Small Business Survival Committee, a lobbying group in Washington, D.C. The small business grapevine has heard of increases as high as 50%.
What gives? "The barrage of federal and state regulations is starting to take its toll," says Grace-Marie Arnett, president of the non-profit Galen Institute, a public policy institute in Alexandria, Va. "Insurers are having to pass along costs from legislation like Kennedy-Kassebaum, which increased portability and flexibility (of coverage) when a person leaves his or her job," she adds.
Small businesses have always borne the brunt of health care inflation. One reason is that the fewer people there are in a plan, the greater the actuarial risk to insurers. In large companies, costs are spread out among more workers. Also, large companies can take advantage of the Employee Retirement Income Security Act (ERISA), which exempts firms that underwrite their own health plans from state mandates. Few small businesses can afford to self-insure.
However, there are things you can do to absorb shock of higher premium:
Explore buying insurance through a group program, says Bob Brockhaus, director of the Jefferson Smurfit Center for Entrepreneurial Studies at Saint Louis University. "See what you can get through national, state and local industry associations, as well as your Chamber of Commerce," he adds.
Think the unthinkable and ask your employees to chip in a greater share of their premiums. It probably won't win any brownie points, but it might be less insulting than the piddling raises they would have received instead. Pick your poisons.
Kerrigan also suggests that you put off hiring full-time people. Choose temporary or part-time workers who don't require insurance. Where you can, upgrade technology to lessen the need for warm bodies.
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