I know, I know, the health reform debate has gone on for an eternity. Seriously, I was a young girl with braces when it started. And I get that a million points have been made on this topic, and that making another one seems like beating a dead horse.
But I feel the need to make a point that only someone in my business can make.
I am an HR consultant. As part of my consultative services I assess and design benefits packages for my clients who are, for the most part, small businesses with 100 employees or less. I feel compelled to share my perspective on health insurance during this time of heated debate about health insurance reform.
For the past 9 years, I have received double digit rate increases from all of the insurance carriers that are available on the market to choose from. To put this in perspective, I would like to share some numbers with you. In 2002, the average cost of health insurance for an employee on an HMO was $155 per month. The rates that were quoted to me for the 2010 plan year put the cost at $566 per month. Now keep in mind that this new $566 a month plan has a higher doctor visit co-pay, a higher prescription co-pay, and a higher emergency room co-pay than the 2002 plan. It also has a much larger list of prescriptions that won’t be covered under the plan.
Three years ago, I decided to try a radical plan to reign in the rising costs. I designed the company plan around a very high deductible PPO option. In exchange for a very high deductible, the insurance company offers the subscriber lower premiums. “High deductible” means $2500.00 a year for a single subscriber, $4500.00 a year for a family. When I received the quotes for the company plan renewal plan last year, the cost difference between a standard HMO and a high deductible PPO was $1896 annually. So for an annual premium savings of $1896.00, the insurance company is offering you an up front gap in coverage of $2500.00.
Sounds like a terrible deal, right? Not necessarily. If you never use your health coverage, it’s a decent alternative because you’re saving on that monthly premium cost. That’s money that you spend whether you use your insurance coverage or not. If you have any sort of chronic illness, this is a terrible deal because you’re spending $2500 to save $1896! But this type of plan made sense at the time because most employees don’t use enough health insurance to meet the deductible, which the company reimburses. So the company saves money on monthly premiums and takes on the liability of reimbursing each person on the plan against their deductible. Keep in mind that premium money is spent whether someone uses their insurance or not. Reimbursements are only made when an employee goes to the doctor.
This plan actually did work to mitigate rising costs until now.
Remember those huge premium increases I told you about? Here’s what they translate to today; the monthly cost of a high deductible PPO plan today is more than double the cost of an HMO with no deductible in 2002. That traditional HMO plan now costs $20,000.00 per year, per family for small businesses.
The 2010 increase from Blue Shield of California is up 25% from 2009. The reason they cite? Too many COBRA subscribers on the plan. What does that mean? It means that you’re paying for COBRA when you’re on it, and you’re paying for COBRA when
you’re not on it because these increased premium costs are shared by both employer and employee. Insurance companies have figured out a way to turn a much needed federal requirement to provide COBRA, into an additional revenue stream for themselves.
Not disgusted enough yet? I just received information that Blue Shield is raising their rates for small groups (defined as being groups of less than 51 subscribers) by 65% for the 2010 plan year. You read that correctly, a sixty five percent increase on the smallest of small businesses.
These costs have become untenable for small businesses. So untenable that in a sluggish economy these costs can be the difference between staying alive to create more jobs when revenue improves, and closing up shop thereby adding to the unemployment numbers.
Most people agree that small business is the foundation for a strong, healthy US economy. Yet in a time when we need small business more than ever, our health insurance system is crushing small businesses and making it virtually impossible for entrepreneurs to venture out and start companies that ultimately create new jobs.
While we all hope that 2010 will bring us a stronger economy in these uncertain times, I am certain of one thing; my clients won’t be creating jobs anytime in the near future.
