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Small business having big problems with health care

Employer-based health care costs remain the No. 1 problem facing Colorado small businesses, according to a report released this week by the Colorado chapter of the National Federation of Independent Business.

NFIB/Colorado surveyed 12,000 small business owners about health care costs, and nearly 800 responded. Out of those, almost 70 percent reported their health insurance rates have increased 20 percent or more over 2001.

Everyone knows health insurance is in a national crisis. Within small businesses, how have costs gotten so high? Who or what is to blame? And what can be done to curb the trend?



The answers are complicated.

Small businesses are the only insurance customers that have their policies controlled by state legislation, which results in higher rates, according to NFIB state director Tim Jackson.



Such state-imposed mandates usually don’t apply to self-insured businesses and individual policy holders, although other factors have caused premiums to climb for them.

Between 1995 and 2002, Colorado added 24 government mandates – or increased coverage requirements – to small business health insurance plans, driving costs up. Maryland, which has the highest health insurance rates in the country, has the most mandates of any state, with 59.

Insurance agent Jim Finkle, owner of Rifle Insurance Service, said his office handles all aspects of insurance: auto, home, business, health and life.

“Group health care benefits mandated by the state legislature are hitting small business owners hard,” Finkle said, referring to his small business customers with 5 to 50 employees. “Every time the legislature approves more required coverage, costs naturally go up.”

Although the Colorado General Assembly votes on these mandates, the buck doesn’t stop at the state Capitol. NFIB’s Jackson said another layer drives costs: the medical industry.

“Here’s an example,” Jackson said. “This year, a group of prosthetic manufacturers sponsored a mandate requiring every group health plan in Colorado to have the same coverage for prosthetics. The prosthetic industry threw a lot of money into their campaign. At the hearing, they even filled the room with people who use prosthetics. The mandate passed.”

“These mandates are seemingly inexpensive,” he said. “but pennies add up.”

Jackson said proposed mandates sometimes seem absurd.

One mandate sponsored by a psychiatric association asked for mental health troubles such as job stress, insomnia, jet lag and an irrational fear of embarrassment be covered by Colorado group health insurance plans.

“That one was batted down, but it was close,” Jackson said.

Still, some mandates have already been voted into Colorado’s health insurance policies. Finkle said in Colorado, small business owners are required by law to provide maternity insurance coverage to all employees – even if none of the employees could bear a child.

Although both Jackson and Finkle agree government regulations and mandates are the main reason group health plans costs are so high, other factors come into play.

In its recent health care cost report, NFIB identified significant cost drivers including the country’s aging population and technology improvements that extend life.

Medicaid and Medicare do not pay the full cost of care for patients they cover, so hospitals and insurance premiums paid by small businesses often pay the difference.

The report also indicated people are using their health insurance more. Because of relatively low co-pay fees, NFIB contended employees visit doctors more often than they did 20 to 30 years ago.

NFIB cited general inflation and trial lawyers’ malpractice litigation as contributing factors.

Increased pharmaceutical costs also drive costs up, as can fluctuating interest rates.

“Insurance companies lose money when interest rates dive, and that can contribute to increased (premiums),” said Jackson. “It is a factor, but we can’t do anything about interest rates. We can do something about government mandates and small business health insurance plans.”

Finkle agreed with Jackson that the most significant thing individuals can do is write their state legislators expressing their opinions on health insurance mandates.

“The laws need to be changed,” he said. “And the legislature needs to hear from those most affected.”


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