Wednesday, September 01, 2004
Small businesses looking for insurance alternatives as rates rise
[Eve Tahmincioglu, "Tackling the High Cost of Health Benefits," The New York Times, 26 August 2004.]
Health insurance costs continue to rise almost universally, but small-businesses seem to be bearing the brunt. As this article suggests, one way to avoid dropping insurance altogether is to move toward consumer-directed options such as health savings accounts:
Since 2001, small-business owners across the country have had to come up with innovative strategies to cope with double-digit increases in their health insurance premiums, but this is the year that many of them are finally crying uncle, according to Mark A. Cesarano, a health consultant for the Savitz Organization, an actuarial and employee-benefit consulting firm in Philadelphia. More than in years past, Mr. Cesarano said, they are scaling back coverage, increasing workers' contributions and increasing co-payments and deductibles.
The pain is widespread, and deep. In a June study by the National Federation of Independent Business, a Washington-based small-business advocacy group, 65.6 percent of small-business owners surveyed deemed health insurance costs a "critical" issue, a level of anxiety that the federation says it has not seen in the 22 years that it has been conducting surveys.
Small businesses do seem to be bearing the brunt of the problem. According to a study by the Kaiser Family Foundation and the Health Research and Educational Trust, health care premiums for businesses with fewer than 200 workers climbed 15.5 percent last year, compared with 13.2 percent for larger companies. On average, small-business owners spent $3,432 on insurance for each employee in 2003, compared with $3,360 for bigger companies.
And the smaller the firm, the more it pays, especially if it has a high proportion of older or female workers. "Insurance companies have a hard time predicting claims for businesses with less than 100 employees because there are fewer bodies to spread the risk," said Mr. Cesarano of the Savitz Organization. To deal with this, many insurance companies ask workers for information about chronic illnesses and pregnancies. That may bump up rates, he said, although federal law prohibits the companies from denying coverage.
Over all, the share of small businesses with fewer than 200 employees that offer insurance declined to 65 percent last year from 68 percent in 2001, the study found, and experts fear that number will keep falling if things do not change.
Some health care experts view health savings accounts as promising. The accounts allow employees and employers to contribute to a tax-free account that is used to pay for routine doctor visits and deductibles on the catastrophic coverage that typically accompanies such plans. Similar plans, known as flexible savings accounts, have been around for decades but have had low participation rates, experts say, because of high deductibles and the fact that unused money in the plans is lost at year's end. Health savings accounts have lower deductibles and a rollover component so funds are not lost.
[Eve Tahmincioglu, "Tackling the High Cost of Health Benefits," The New York Times, 26 August 2004.]
Health insurance costs continue to rise almost universally, but small-businesses seem to be bearing the brunt. As this article suggests, one way to avoid dropping insurance altogether is to move toward consumer-directed options such as health savings accounts:
Since 2001, small-business owners across the country have had to come up with innovative strategies to cope with double-digit increases in their health insurance premiums, but this is the year that many of them are finally crying uncle, according to Mark A. Cesarano, a health consultant for the Savitz Organization, an actuarial and employee-benefit consulting firm in Philadelphia. More than in years past, Mr. Cesarano said, they are scaling back coverage, increasing workers' contributions and increasing co-payments and deductibles.
The pain is widespread, and deep. In a June study by the National Federation of Independent Business, a Washington-based small-business advocacy group, 65.6 percent of small-business owners surveyed deemed health insurance costs a "critical" issue, a level of anxiety that the federation says it has not seen in the 22 years that it has been conducting surveys.
Small businesses do seem to be bearing the brunt of the problem. According to a study by the Kaiser Family Foundation and the Health Research and Educational Trust, health care premiums for businesses with fewer than 200 workers climbed 15.5 percent last year, compared with 13.2 percent for larger companies. On average, small-business owners spent $3,432 on insurance for each employee in 2003, compared with $3,360 for bigger companies.
And the smaller the firm, the more it pays, especially if it has a high proportion of older or female workers. "Insurance companies have a hard time predicting claims for businesses with less than 100 employees because there are fewer bodies to spread the risk," said Mr. Cesarano of the Savitz Organization. To deal with this, many insurance companies ask workers for information about chronic illnesses and pregnancies. That may bump up rates, he said, although federal law prohibits the companies from denying coverage.
Over all, the share of small businesses with fewer than 200 employees that offer insurance declined to 65 percent last year from 68 percent in 2001, the study found, and experts fear that number will keep falling if things do not change.
Some health care experts view health savings accounts as promising. The accounts allow employees and employers to contribute to a tax-free account that is used to pay for routine doctor visits and deductibles on the catastrophic coverage that typically accompanies such plans. Similar plans, known as flexible savings accounts, have been around for decades but have had low participation rates, experts say, because of high deductibles and the fact that unused money in the plans is lost at year's end. Health savings accounts have lower deductibles and a rollover component so funds are not lost.
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