Home > Fande = Fact & Evidence, The Economy > With Private Health Care, costs keep rising for small businesses

With Private Health Care, costs keep rising for small businesses

http://www.nytimes.com/2009/10/25/business/smallbusiness/25health.html?hp

EXCERPTS:

Small businesses…employ about 40 percent of the private labor force….

In August, when Walter Rowen, who owns Susquehanna Glass in Columbia, Pa., sought to renew his company’s coverage for two dozen employees, he said his insurer demanded a 160 percent rate increase. Mr. Rowen said he was told his work force was “getting too old and very expensive.”

Mr. Rowen said his insurance broker found that any other health plan was likely to charge 30 to 50 percent more than he paid last year. He chose a less generous plan from a different carrier for 44 percent more….

Owners of small companies say the lack of options is why they have been paying increasingly higher premiums for less and less coverage — this year perhaps more than ever….

Small businesses…tend to pay more for the same coverage because they cannot spread the cost of expensive medical conditions or hospitalizations over large numbers of workers. Premiums can be especially high if they have sick or older workers…..

“This underlines the urgent need for health insurance reform, including a public option,” she said in an interview. “We need to have competition for the insurance companies to keep premiums down”….

Higher medical costs aside, some experts say they think the insurance industry, under pressure from Wall Street, is raising premiums to get ahead of any legislative changes that might reduce their profits….

Michael A. Turpin, a former senior executive for UnitedHealth, the insurer, and now a top official at USI Holdings, an insurance brokerage firm, said insurers were now “under so much pressure to post earnings, they’re going to make hay while the sun is shining”….

But benefits consultants say there is no doubt that premiums are soaring for many small businesses. Edward Kaplan, a consultant with the Segal Company, said his clients were seeing renewals for coverage at prices 15 to 23 percent higher this year. Last year, he said, they typically faced increases of 7 to 12 percent.

The brokers and consultants say the price jumps seem hard to justify. “Frankly, I’m mystified by the size of the increases,” said one broker, Charles J. Newman, who works with small employers in the New York area.

Some say the threat of an overhaul may be at least part of the reason. Joshua Miley, a consultant with HighRoads, which analyzes benefit information for employers, said the “undercurrent of health reform is driving part of the renewal increases.”

HighRoads projects that premiums will rise 14.4 percent for an individual in a health maintenance organization plan at a typical small employer….

Hospitals, for example, have been treating greater numbers of people who have lost their jobs and their insurance, and they are passing along some of those costs by charging higher prices to private insurers.

The industry also points to low government payments to hospitals and doctors, which insurers say result in higher prices for employer-based coverage to make up for the shortfall.

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