More about health insurance

The general statistics show that health insurance premiums have been rising faster than inflation in the business sector while the extent of the cover is being more narrowly defined. It is the old “less for more” syndrome. Insurance companies are not unjustified in raising their premiums. They can point to the rising costs of drugs and medical devices, and the increasing charges levied by hospitals, clinics and professional health care providers. Since their costs are rising and their investors expect a dividend, premiums must rise. Worse, the health of the nation is deteriorating. With an epidemic of obesity, the health services are buckling under the resulting waves of cases with high blood pressure, heart disease and type 2 diabetes. Unless there is government intervention to fund the national expansion of health care, the costs for all will rise. This gives business owners and managers a serious problem as the recession gathers pace and revenues fall. How does a business reduce costs without sacrificing the employees’ goodwill? Under normal circumstances, it would trade-off between the cost of the health plan and other benefits. But in this economic situation, it is likely that pay and benefits must be reduced if the business is to survive with full employment. Among small businesses, the number of employers providing health plans has dropped 10% in the last three years. Alternatively, a number of nonessential employees will have to leave to pay for continuing benefits for the survivors — painful downsizing.

One compromise tactic is to play the yearly “shuffle”. As an incentive to transfer business, insurance companies often offer a first year discount. So some small businesses look to transfer their health plan to a new carrier every year. This is a real administrative headache and inconvenient for all the employees to switch doctors, but it does save money. The great hope was that businesses would pool their insurance and negotiate their cover as a group. Insurance companies have mostly won the war against this both as an initiative of business associations and at state level. California, for example, attempted to combine features of the individual and group market. This was not a great success. This leaves business with the choices of increasing the deductibles or making the co-payments or paying the expenses fo the employees. These are slightly risky options because, unless limits are written into the commitment, a serious accident involving one employee or one long-term illness can swamp the budget. However, this is a balancing of cause and effect. In any group plan, major costs incurred by one can also drive up the premium for everyone in the plan.

Insurance helps to keep businesses afloat. Small business insurance is particularly important because, until there are cash reserves to fall back on, even a small liability can be devastating. Health insurance is a valuable part of the remuneration package in businesses of all size. It helps maintain staff morale and gives a business the best chance of keeping key personnel healthy. But, equally, business insurance premiums must remain affordable. Hence, the interest of business associations and states in group schemes.

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