Coping With Insurance Costs | Another year of 10% premium increases adds to health care concerns for businesses
For many business owners, the only expense rivaling fuel may be health insurance. This year, many companies are seeing their premiums rise 10 percent or more.
According to some Central Massachusetts insurance agents, there are no perfect solutions to dealing with the rising costs, but businesses still have choices to make in an effort to find the least of several possible evils.
The Trouble With Being Small
âEverything's going up. Nothing's going down,â said Chrystine Heier, a principal of Group Insurance Solutions Inc. in Worcester and Needham Heights.
Heier said that, among the mostly mid-sized businesses she works with, some plans' premiums are rising as little as 3.2 percent this year, while others are sky-rocketing by more than 20 percent. Smaller companies typically face more variation, she said, partly because a group's demographics can change dramatically with the turnover of a handful of positions.
Richard McGrath, president and CEO of McGrath Insurance Group Inc. in Sturbridge, said health insurance costs are rising much faster in Massachusetts than in the nation as a whole. He argues that part of the reason is that the state requires coverage for many specific procedures, from in vitro fertilization to chiropractic care.
âYou're forced to buy the Cadillac when you may want something different,â he said. âThat has a profound effect on group medical insurance here in Massachusetts.â
Still, Heier said many workers don't want to see their employers make the reductions in benefits that are allowed under state law. She said some of her clients have surveyed their employees and found they're willing to accept their share of higher deductibles rather than lose out on plan quality. But, she said, with other costs like gas prices and food rising, that may not last long.
McGrath said the state's sweeping health care reform effort has also jacked up costs for many employers.
âI think [the state reform] has kind of failed from a financial standpoint,â he said. âThe whole objective was to lower the cost of health insurance in Massachusetts.â
The Massachusetts Taxpayer Foundation, a business-friendly policy group that helped shape the reform effort, estimated in a December 2007 report that employers will spend an extra $175 million a year for employee coverage under the reform law. But the foundation said the extra spending is crucial to making coverage universal and will result in fairer distribution of the costs of free care, as well as more comprehensive coverage for many workers.
Heier noted that another cause of the higher premiums is the development of new technology to keep chronic diseases under control and help people live longer.
Contingency Plans
Whether the rising premiums are all for a good cause or not, companies have to find ways to deal with them.
McGrath said many employers respond to higher premiums by shifting the costs to employees. While some still pay 100 percent of the costs, he said, some are shifting as much as 40 percent to employees. He said other companies pay for higher premiums by withdrawing benefits like life insurance or dental plans.
Heier said another way many companies respond to the higher rates is to adopt plans with higher copayments. Many plans now have relatively high copays for services like day surgery, diagnostic tests and hospital stays, she said.
High-deductible plans are also on the rise, McGrath and Heier said. Heier said some companies find it's cheaper to buy one of those plans and use the savings to open health reimbursement accounts to pay employees' deductibles. Some give out special debit cards to cover the deductibles, while others reimburse employees after they pay out of pocket, she said.
âIt's saving people money, and the employees understand that,â she said, âBut it's a lot of extra steps because people aren't used to that.â
Heier said most of her clients are willing to pay 100 percent of the high deductibles, which are often as much as $2,000, but she thinks some may soon start demanding that employees pay for them themselves.
Still, Heier said the rates increases she's seeing for plans coming up for renewal these days are less than in some recent years: largely in the 8 to 10 percent range.
âOur fear was we were going to get hit by another 15, 20 percent,â she said.
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