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BY ADINA POSTELNICU
Medill News Service | Friday, November 11, 2005 | (No comments posted.)
As rising health care costs continue to squeeze small businesses, more firms are discontinuing employee insurance, contributing to the expectation that the huge number of Americans with no health coverage will continue to go up.
But some businesses are turning to tax-favored health accounts, and a few are coming up with innovative approaches to encourage employee wellness.
Health care premiums increased by nearly 10 percent in 2005, according to a study by Family USA, a national nonprofit organization that advocates for affordable health care for all Americans. Although premium growth was down from an 11.2 percent average in 2004, the 2005 increase is still more than three times the growth in workers' earnings (2.7 percent) and two-and-a-half times the rate of inflation (3.5 percent). Since 2000, premiums have gone up 73 percent.
According to the Campaign for Better Health Care (CBHC), an Illinois-based coalition of more than 300 local and statewide organizations, a 2004 survey showed that eight out of 10 small employers were "very frustrated" or "frustrated" with insurance costs, and nearly 70 percent of them said they anticipated having problems keeping their company's health plan in the future.
"To cut costs, small businesses are confronted with diminishing the amount of coverage they offer. In some instances, employers are completely dropping coverage," said David E. Brennan, executive vice president of REGIT Inc. of Glen Ellyn, which provides insurance plans for small firms, individuals and real estate professionals.
Blanca Kavouras, 54, owner of a small diner on Chicago's Northwest side, no longer obtains health insurance for her employees, or even for herself. "It looks like you can afford it, but you cannot," she said at a public hearing organized by CBHC.
Some small companies are moving to "consumer-driven health plans," said Greg Thompson, communications director at UnitedHealthcare Group Inc., a national insurance and managed care company. "That's the biggest trend we've seen," he stated.
A CDHP is a medical plan with a high deductible, perhaps $1,500, coupled with an employer-funded reimbursement account that covers expenses not covered by the group insurance policy.
These plans are appealing to small companies because "monthly premiums are less," Thompson explained.
At REGIT, said Brennan, "we decided to establish a health care reimbursement account. By purchasing a higher deductible we had lowered our premium costs for the insurance," he explained. "It's a budget tool," and the strategy paid off.
REGIT, which has 10 employees, saved $8,700 per year with the new approach. Without it, "we would have had to cut benefits and shifting more of the burden to our employees," Brennan stated.
Other companies are encouraging their employees to create their own health savings accounts, according to Brennan.
Contributions to a health savings account are tax-deductible, and the earnings are exempt from taxation.
At the same time, Thompson of UnitedHealthcare stated, there is a greater interest in wellness programs. "Employers are asking for creative solutions," he said.
Elkay Manufacturing Co., an Oak Brook manufacturer of sinks and other kitchen equipment, went for a creative approach.
"We opened a 24-hour nurse counseling line, where they can call to find out what works best for them" in terms of health products and services, said Walt Reilly, Elkay's vice president of human resources.
Aiming to educate employees to be knowledgeable consumers, Elkay provides a health information newsletter, on-site health screenings and local wellness teams that sponsor activities. Moreover, it pays each employee $25 to take an annual screening. "We've saved three or four lives per year," Reilly said.
The company investment is $1.5 million annually, but "for every dollar invested, we save seven," Reilly said.
Rob Wilson, president of Employco, a Chicago-based firm that provides human resource-related services to small businesses, said his company is looking at multiple options, like "putting more clients together and increasing the buying power."
As some small businesses just give up on health insurance, they contribute to the huge population of uninsured.
The numbers already paint a gloomy picture: In 2005, more than 2 million Illinoisans will be uninsured for the entire year according to a report by Family USA. By 2010, the number would go up to almost 2.3 million, the study shows.
At a national level, the number of uninsured Americans increased by 6 million between 2000 and 2004, primarily because of a decline in employer-sponsored insurance, according to a MarketWatch study. More than 45 million now have no health insurance.
The growing number of uninsureds adds further to insurance premiums. In Illinois, it means that annual premiums for individual health insurance coverage were $400 higher in 2005. Even for a family with private, employer-sponsored coverage, premiums were $1,059 higher in Illinois due to the unpaid cost of health care for the uninsured, the Family USA study showed.
For the self-employed, there's simply no relief.
Beth Najber of Chicago has had her own business for 14 years, developing training programs for people in large corporations.
"In 2000, I paid $175 per month, now I am paying $650 per month? Today, health care costs account more than 15 percent of my expenses," she said."And that's a lot."
She pays it by limiting business re-investment and contributions to her retirement plan.
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