Hey, there! Log in / Register
Local small business gets whacked by health-insurance costs
By adamg on Thu, 01/20/2011 - 10:02am
Joanne Chang-Myers tweets:
Heath ins prems went up 32% for Flour w this renewal. Weighing alternatives-offering 2K deductible plan feels incred unfair to staff.
Via Adam Castiglioni.
Free tagging:
Ad:
Support Universal Hub
Help keep Universal Hub going. If you like what we're up to and want to help out, please consider a (completely non-deductible) contribution.
Comments
Ludwig Von Mises
Ludwig Von Mises theorized many years ago that when you devalue the dollar, goods and services will rise in price at different rates. Part of what you're seeing is health costs going up first because people will pay a premium to stay alive, and go buy Costco brand jeans to shift their money towards healthcare. Holding down prices just means doctors have to go buy their jeans at Costco.
The second part is governments requiring health insurers to cover more expensive people. I'm not saying don't do that, just realize somebody will have to pay, and that somebody is us.
Bulk purchasing
There's more to this issue than routine inflation or coverage mandates. Chang-Myers is an insignificant purchaser of health care. She cannot negotiate a good rate because the risk pool of her employees is too small. This is the primary factor making health insurance costs sky rocket for small business.
If we could only find some way to bundle all the insured into a single pool, and pool the payments so that it's one large purchaser negotiating with the insurers. Maybe we could call such a system, for lack of a better idea, "single payer."
You seem to be confused.
You seem to be confused. Costs are not high for small businesses because they have little bargaining power. Costs for small businesses are high relative to large businesses because they have little bargaining power. That says nothing about why costs go up year to year.
Costs go up year to year because the field is always finding new treatments (ways to spend money), and the insured expect to have those new treatments covered under their existing policy.
Sorry, no confusion
As you point out, it is a relatively higher rate of increase. But that is irrelevant to the small business owner. What is relevant is whether the increase renders coverage unaffordable. If the large buyer was facing similarly large percentage increases, then the lack of bargaining power wouldn't be an issue. However, it clearly is.
As for your second point, I can't disagree with it. There are many issues stimulating higher rates, but the most unfair cause of rate increases lies with varying sized risk pools.
group buying power
I work in sales and a large portion of my day is spent talking to small busineses about health insurance. The fact is that small businesses pay significantly more for health insurance due largely to the fact that they have zero negotiating power, haven't made an effort to higher young workers (younger workers = cheaper health insurance for everyone), and go along with trained sheep when their broker feeds them a 25% plan-for-plan rate increase. Lower rates can be obtained by small businesses through industry group rate negotiations (eg: Mass Bankers Association) or co-employment models (eg: PEO). Unless small business owners figure out how to "think outside the box" they will continue to be caught bringing a knife to a gun fight come renewal time.
Do you seriously think...
That Flour has a significant population of older workers? Have you been there? I'd gamble that most of their employees are under 35. And she has three bakeries. What's wrong with this picture that she's unable to get reasonable health insurance?
One Guess
Most of those employees are female.
MA lets insurance companies surcharge for young women because they just go out and get pregnant!
By parthenogenesis, no doubt ...
Sounds like a job for the legislature to stop that shit. In the meantime, women get shafted for just being able to mysteriously impregnate themselves without any of those cheap young males being involved, I guess.
Aw, Come On, Swirly
I'm not saying you're wrong about the female part probably having something to do with it, but, well, since only females can become pregnant, it DOES make sense to surcharge females. The males, no matter how responsible any one male may be for at least one pregnancy, won't be seeking medical attention because of it. Therefore, no added expense.
It's similar to charging more for auto insurance for drivers under 25, and - if I'm not mistaken - especially male drivers under 25. Am I missing some part of the equation?
Suldog
http://jimsuldog.blogspot.com
Ah, but do men get surcharged for Avodart or prostate surgery?
Since those are uniquely for men only?
I Don't Know
I suspect surgical procedures come under a separate heading, and would also include female-specific surgeries, such as hysterectomy. Pregnancy is viewed as optional, I imagine.
(God, I'm not saying it is or isn't. But I bet insurance companies view it that way.)
Suldog
http://jimsuldog.blogspot.com
Regardless ...
Until and unless we develop parthenogenesis, there are males involved at some point in pregnancy.
This is essentially a license for employers to discriminate against women and hire men instead.
What is further ridiculous is that many women become covered under "family" plans under their husband's insurance after they become pregnant or deliver a child.
Regardless...
Until and unless we develop male wombs, there's no male involvement in the embryonic medical care necessary with a pregnancy.
Unless you want to go the pro-life route and argue that the fetus is a distinct individual and should carry its own health care costs...
Um
The whole purpose of INSURANCE is that everyone pays basically the same amount regardless of how they use it. Much like paying taxes for the fire department, we all pay into an insurance pool so that one person who needs an expensive operation is covered.
If we were to charge people based on what services they use, wouldn't we just have everyone private pay? And then if someone ends up severely disabled and needs state services that they can't work to pay for, we'd just kill them?
That isn't really the whole purpose of insurance.
But women shouldn't have to pay more just because they are women and might get pregnant. That's what co-pays are for.
What is the purpose then?
?
risk management for the most part.
Health insurance is different in a lot of regards, but a 45 year old male smoker is going to pay more for a million dollar life insurance policy than a 25 year old female non-smoker, like it would cost more to insure a 17 year old male driver than it would a 30 year old female driver. People that are 70 years old will probably not be able to get the same insurance you or I can get.
I'm not talking about single-payer/pre-existing conditions and whether they are right or wrong. A single payer plan isn't really insurance in the true sense of the word, its more of like your example of the fire department. You pay (or don't pay) a tax and the fire department will always respond.
Basically there are limitations and the risk management concept is still applied to American Health insurance. (If x% of women may have babies under our plan, then our co-pay needs to be $z in order to still make money).
We allow price discrimination
We allow price discrimination in the health insurance market for a variety of attributes and disallow it for others. For example, we allow health insurers to price for age. The government could just as easily outlaw that. It sets regulations on health insurance it deems appropriate, such as outlaw rescission and require insurers to cover people with pre-existing conditions.
The Netherlands charges all citizens young and old, sick and healthy, male or female exactly the same price. The also set up the their health system to provide incentives for care providers to drive the cost of care down.
Not exactly
Not really. Insurance is based on risk, and historically, insurance carriers have put people in groups to better assign risk, which determines premiums. Sometimes people don't like the way groups are formed, whether it be age, sex, race, domicile, hobbies, occupation, etc. That's a whole other topic. The end result is, everybody is not paying the same.
Now, whether one agrees with the way insurance companies group people is generally based on whether they pay more - or pay less. If they are in a good group (low risk), they'll pay less and like the system. If they are high risk, they'll pay more and claim discrimination. I'm not saying whether it right or wrong, it's just the classic insurance model.
So, do you think higher risk people should pay more? For example, should a 17-year-old male from Revere pay the same car insurance premium as you? Should he pay the same as a 55-year-old living in Great Barrington, MA? Not easy questions. I know people with teenagers that pay 3 to 4+ times what I pay in car insurance. Teen drivers are a known risk, but is it fair?
Should a severely overweight person pay the same health insurance premiums as an active, fit person?
Apparently, insurance companies have found that, over the long run, females require more from a health provider, so they charge higher premiums. (Is this true?? I really don't know.)
A classic case: Years ago, women complained that their pension payments were not as much as a male. The claim was that a pension is essentially an annuity, that women lived longer (that's a fact), and therefore, given the same annuity, their monthly payment had to be smaller. Women didn't like that. Of course, you didn't hear women complaining that, because they lived longer, their life insurance premiums were less than males.
Then there's the whole pre-existing condition thing. If someone has a pre-existing condition and they're trying to get health insurance, it's a tough situation. It's not insurance anymore, from a risk standpoint. When it's 100% certain that a person will get a heart condition because they already have a heart condition, it's not insurance. It's more of a subsidy. Again, I'm not saying I agree or disagree with certain policies, I'm just pointing out the tough questions.
So, when you say that everybody pays the same for insurance (life, health, car, etc.), that's simply not true today, and there are good reasons for it. Whether you agree with that policy is a debate that has been going on forever, and will continue to go on.
Meanwhile the first official
Meanwhile the first official response from the Republican majority House is to offer an empty, symbolic vote to undo the first major attempt to improve health care. A mature group of people would express their disagreement with current law by offering a constructive gesture. Instead we have adult children stamping their feet yelling "No No No!"
Getting creative
What my small company did was place a bet on us. They took a higher deductible plan, which reduces their costs. Then they guaranteed us the cost of the deductible. They're betting that most of us will never need to use it, so it costs them less in the long run.
If the ($2000) high deductible plan saves Flour, say, $16000/yr over their current plan, then Flour could afford to have up to 8 employees need to use their entire deductible and still break even over their current plan. Alternatively, they could cover 16 employees for $1000 each and it would be the same as if the employee had a $1K deductible instead. It's a risk, but by doing some actuarial work, you can usually cut a path that fits better than eating the high increases in the lower deductible plans.
And a bit more creativity
You can even take out secondary insurance on the deductible itself. The premium for the deductible coverage insurance + the premium for the high deductible primary plan is often less than the lower deductible's premium. This is a clear demonstration to me that our system is broken. Essentially, the secondary insurer is taking a lower profit profile and thereby subsidizing the profit of the primary insurer. It's crazy, but just one of many examples of how really idiotic our system is.
That's what my company did.
Though the deductible amount was less.
It's a viable plan. You just have to analyze the costs to see what plan will work. Flexibility, and an open mind, is the key.
High deductible plans are a pain, but they work -
That's what my company had to do. They contribute half of the deductible to the HSA, and it still saved this non-profit organization many thousands of dollars. It's difficult to get accustomed to, and it's a lot more work, but in the end, it amounts to almost the same. Especially if staff were previously saving money in a FSA for out-of-pocket expenses.
Pain in the arse, but it works.
My company offers an HSA as
My company offers an HSA as well. For the first year, it worked really well. The insurance company handled the processing. The deductible just wouldn't appear on the explanation of benefits until the company's portion was used up. So the employees didn't have to do any extra paperwork.
But then the next year they stopped the automatic processing for some reason. So now employees have to wait for the insurance to go through, wait for the doctor to send the bill for the deductible, pay it, and then file for a reimbursement from the HSA administration company. It's a major pain, and some of us switched to a different plan as a result.
Poor employers
How come employers are stuck with the burden of insuring everyone? I understand the historic background, and the current IRC tax deduction that subsidizes employer-provided insurance, but... Why not just make health insurance premiums excludable from taxes, and let people buy plans on the open market?
I don't get my car insurance or homeowner's insurance through work - is health insurance that much different? (If we got rid of the current tax subsidy system, that is.)
Because the open market means
Because the open market means that companies pick and choose who they insure, meaning that some people would then not be able to get health insurance. In the absence of a public option that would allow anybody to be insured, this is not a good option for the millions with pre-existing conditions/other that would allow insurance companies to deny coverage.
Obamacare minus employers
To clarify my query:
Right now, we assume that the majority of people will get their insurance through their employer (or their spouse/parent's employer). Employers (in MA) are required to go out, find an insurance plan, and offer it to employees. Employees then sign up for it and pay their share. It's a headache for employers, who need to do this time-consuming and costly exercise every year, and it sucks for consumers, who are stuck with a limited range of options for whom they choose as an insurer.
So how come we don't cut out the middleman? Let people choose to go with Blue Cross or United or Tufts or whatever, just like I can choose to buy Geico or Nationwide or Amica, without being bound to my employer.
This is a different question, I think, from pre-existing / mandatory insurance. You can still prohibit discrimination based on pre-existing conditions, and (the corollary) require that everyone be insured, and still cut employers out of this mess.
How much do the wealthy owners pay for healtcare?
You would think that with a 2000% markup on cupcakes, Maybe Joanne could afford a little less profit to start yet another restaurant, and actually foot more of the cost. Also, another way to save money is to lower operating costs, versus complaning about how you have to pay benefits for your employees.
You could always just hire less attractive people for below minimum wage, vs those guys who look like models trying to sell me a meat panini.
Just my two cents (or some amount of pesos)
I have an idea. Why don't you
I have an idea. Why don't you open a bakery cafe and see how much you enjoy razor-thin profit margins and a seven day workweek? Anyone with a clue will tell you that JC is one of the smartest, hardest-working people in the business and yes--she seems to manage to be a decent, kind person and to treat her employees well. Read the post again--hardly a complaint. You sound like a fool.
Say what you want, the tweet
Say what you want, the tweet was a public whine.
So you're an expert on the books of her bakery? What about the other restaurants she owns? Why not organize them all into one corporation, and then with more employees, get a better deal on health care?
There are several tax credits and subsidies to offset the cost for employers - but I don't see anyone talking about that. She may be a talent and a nice person, but it is akin to someone just complaining about paying high taxes - le sigh.
As for profits, don't people do it for the love of baking?
Say what you want, anonymous...
She's basically throwing the question out there--which way to go. Hardly a whine. And yes--she owns three bakeries and M + C and was, I believe, a math major so I'm sure that bundling may have occurred to her. I still find cupcake boy's comment ignorant, presumptuous and foolish.
Not just small employers
Every year the insurance through my large employer goes up considerably. They send us an e-mail telling us how much and telling us what they've cut in order to not just pass the whole premium increase on to us. Most years it's been about a 10% increase in the part we pay, a 10% or so increase in what they pay, and some sort of cut like the deductable going from $2500 to $5000, or requiring us to use Express Scripts instead of giving us the choice like we previously could.
We're a large employer, but we're a non-profit and the company doesn't have the money to just pay the extra and shrug it off. Some of my colleagues who work for hospitals or universities or corporations have completely free insurance because they do the same work at a place that has a different financial model.
It sucks, but there's no sense in trying to pretend this only happens to small businesses. It's happening everywhere, and the only real solution is to have a single-payer system so that large for-profit corporations are paying their fair share.