Next phase of health care inflation: Rising tide of uninsured workers (which is generally inflationary, as much of the cost burden for these folks ends up falling on the taxpayers):
arizonarepublic.com
Small firms face huge health costs
Christine Keith/The Arizona Republic
Tom Cooper, owner of Desert Fleet-Serv Inc. in south Phoenix, switched health insurance carriers this year to avoid a doubling of his premium. But costs still increased 70 percent, and he asked his 17 employees to share that burden.
By Yvette Armendariz
The Arizona Republic
April 29, 2002
Small businesses are being pounded by higher healthinsurance costs, and many are cutting back benefits and raising payments for workers, and asking them to change their health habits to save money.
Health insurance costs have increased anywhere from 15 percent to 70 percent in the past year for small businesses in the Valley.
Insurance agents don't expect those price hikes to slow in the near future, which may force some small employers to eliminate coverage.
"If this trend continues, and it will, they'll have no recourse but to drop it," said Henry GrosJean, president of the insurance agency GrosJean and Associates. "It's a question of employers surviving."
GrosJean expects a minimum 15 percent increase for small-group coverage next year. Other Valley agents are expecting 20 percent to 30 percent gains on average.
Small entrepreneurs and their workers aren't happy, especially with the economy still recovering.
"It couldn't have come at a worst time," said Frank Rivera, president of Phoenix-based ATL, which provides construction specialty inspections and engineering services. The premiums for his 55 employees and their families increased $30,000, or 29 percent, this year, compared to 5 percent in earlier years.
To cushion the blow but avoid changing coverage, he asked employees to pick up 30 percent, instead of 25 percent, of dependent costs. He continues to pay 100 percent of the employee's premium. The move will save him about $2,500 this year.
The rise in health care costs is the No. 1 concern of small companies, according to the National Federation of Independent Business.
Nationally, rates increased 11 percent in 2001, reports the Kaiser Family Institute in California. But they increased 16.5 percent for employers with three to nine employees, and 14.4 percent for companies with 10 to 24 workers.
Small companies have too small a risk pool to command more competitive rates. And firms with 50 or fewer employees often must submit health profiles so insurers get a better picture of the underwriting risks, agents said.
The causes for premium hikes include increased claims, older and heavier employees, pressure from hospitals and doctors to be paid more and increased advertising for prescription drugs that has boosted patient demand for brand-name drugs, rather than cheaper generics.
Tom Cooper, owner of Desert Fleet-Serv in south Phoenix, was shocked to find out the rate he was initially quoted instead would double.
Shopping around, he reduced the increase to 70 percent. But to cut further, he also asked his 17 employees to pick up more of the tab. He will spend $30,000 on health premiums this year.
Cooper feels the increase was arbitrary.
"The (employee group) profile didn't change that much from year to year, and no one had a serious issue during the year," he said.
Yolanda Collazos Kizer, president of Casa Fenix Merchandising of Phoenix, said her insurance premiums jumped 27 percent this year, compared with 12 percent last year. She suspects her surgery last year was a factor. "What can you do? You want it for the 'just in case,' " she said.
She believes it's important to offer insurance to her 20 airport concession employees, and she used to pay 100 percent of the premiums. Now her workers pay 25 percent of the costs. She also encourages them to sign up for insurance under their spouse's plan.
Some companies are dropping their coverage altogether.
Others are considering medical savings accounts; bidding out insurance; offering coverage through preferred provider organizations that are starting to offer lower prices than health maintenance organizations; increasing co-payments; and excluding some coverage.
A national survey by the Kaiser Family Institute this month found that one-third of small businesses offering insurance would likely share premium increases with employees next year.
But the survey also found that 17 percent of small employers with fewer than 24 workers would drop coverage if health premiums increased by 10 percent. Twenty-seven percent said they would drop coverage if rates jumped by 25 percent.
That is unwelcome news in Arizona, where 90 percent of businesses are small and 21 percent of people who aren't elderly lack health insurance.
"The percentage of employees working for small business is huge . . . that's why it's so important to get a handle on these costs," said Farrell Quinlan, vice president of marketing for the Arizona Chamber of Commerce.
So far, few solutions have been proposed.
Separate versions of the Bipartisan Patient Protection Act, which would allow business associations, such as a chamber of commerce, to obtain insurance for a pool of employers and their workers, passed in the Senate and House. But a compromise on the two versions has yet to be reached.
Kristine Kassel, president of the Arizona Association of Health Underwriters and owner of Benefits By Design, said employers can help minimize claims, and costs, by teaching workers how to use insurance. For example, they can encourage workers to use urgent care over the emergency room for minor emergencies, and to buy generic instead of brand-name prescriptions.
"You have to let them know why these rates are going up," she said. |
