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Small groups take big hits

Health insurance premiums are rising for almost everyone, but for small businesses and "groups of one'' the jumps are staggering.

By KRIS HUNDLEY, Times Staff Writer
© St. Petersburg Times
published August 25, 2002


Bill Najmark, known to his customers as the Pizza Man, is 50 years old, works at his Tampa catering business seven days a week and has no health insurance.

"It would cost me $350 to $450 a month, and I can't afford it," Najmark said. "I'm playing Russian roulette, but I figure if I get sick I'll go into the hospital and they can bill me till I die."

More small business owners and employees may be joining Najmark in the ranks of 40-million uninsured Americans when they see the rate increases heading their way.

While health insurance premiums at big companies are going up as much as 14 percent this year, smaller businesses are feeling twice as big a hit. After rising an average of 16 percent in 2000 and 24 percent in 2001, premiums for groups with fewer than 50 workers are increasing an average of 30 percent this year. Nor does anyone expect to see premiums level off in 2003.

The news is even worse for self-employed people like Najmark, known as a "group of one." Because of state legislation passed in the spring, rates for sole practitioners such as hairdressers, Realtors and contractors is soaring.

"Group of one" coverage, available to a person who qualifies as self-employed, differs from an individual health plan in one crucial respect: As with other small group insurance, the state requires insurers to provide coverage, regardless of a person's current or past health status, and the policy must cover pre-existing conditions.

No such requirements apply to an individual health insurance policy.

The upshot, insurance companies say, is that "group of one" coverage has turned into a big money loser. They say sicker individuals flock to the group policies rather than individual health plans that would refuse to cover their pre-existing conditions. Healthy individuals, meanwhile, stick with individual plans, which tend to be less expensive.

In an effort to remedy the imbalance, starting on Oct. 1, rates for "groups of one" will be based solely on the claims experience of that specific person rather than the claims of all small business employees. The new law caps such single-person group rates at 150 percent of the amount charged for groups of two or more.

The legislation raising single-person rates was backed by state Insurance Commissioner Tom Gallagher and signed by Gov. Jeb Bush. Larry Viens, a Palm Harbor insurance agent, said his small-business customers are angry and confused when they hear how the new law will raise their rates.

"They're just bewildered," he said. "The Florida Legislature and the Department of Insurance have to know what's going on, but the people have no representation on this issue."

(Gallagher, Bush and state legislators, along with other senior executives in state government, receive free health care for themselves and their families.)

A spokeswoman for Gallagher said the commissioner understands the change will have a tremendous impact on single-person groups. In June, Gallagher convened a committee of small business representatives, including Robert Watkins, a Tampa accountant, to explore options. Their report is expected in the fall.

Sole proprietors don't have much time to make a decision if they want to change carriers. August is the only month for one-person groups to enroll in new plans; options are limited to no-frills basic and standard HMOs.

Under Aetna's proposed rate increase, a single 50-year-old male like Najmark would pay $447.87 a month for basic coverage, which has higher hospital co-pays and limited drug coverage, and $574.17 for standard. Those prices are 130 percent of identical coverage for groups of two to 19.

Donald Richeson, 61, repairs lawn sprinklers in Clearwater. He was told recently insurance for himself and his wife Ruth, 55, would jump from $500 to more than $1,000 a month.

Aimee Trachtenberg, a 41-year-old hairdresser in Dunedin, shopped briefly for a new carrier before learning her monthly premiums would nearly double. "That's probably close to a quarter of my salary," she said. "How can I spend that on health insurance?"

And even though Mike Herold of Palm Harbor is an independent insurance agent, it hasn't helped him find a good deal. Herold, who had open-heart surgery 20 months ago, has "group of one" coverage through his wife, a hairdresser. Their premiums jumped in February to $862 from $478 a month when his wife turned 50. Though Herold would like to shop for a new policy this month, he won't find a lower price.

"My premiums would be at least $1,300 a month, and the coverage wouldn't be as good," he said.

Insurers say another change that was passed by the Legislature in the spring will allow them to offer HMOs with higher out-of-pocket expenses but lower premiums. Several new plan designs are now being reviewed by the insurance department.

"Employers are moving from richer plans to more affordable ones," said Ken Hoverman, chief executive of United Healthcare's Gulf Coast office. "It's an element of introducing more cost-sharing between the plan coverage and costs that might be borne by the consumer. People are saying, "What can I afford this year that comes in at last year's price?' "

That's what Mark West, president of Quality Marble Inc. in Pinellas Park, thought he was doing when he switched his company to one of United Healthcare's new plans several months ago. Though changing meant a 53 percent increase in premiums, that was better than the 68 percent increase proposed by his previous carrier.

"I'm now spending about $86,000 a year on health insurance," said West, who pays 100 percent of the premiums for his 33 employees. "And to be perfectly blunt, the coverage s--s. It's a horrific plan, they dispute everything you claim, and the formulary (of prescriptiondrugs) is microscopic."

West anticipates his health care premiums will continue to increase, though they may not rise as quickly if three older workers, all over 65, retire. He's also considering shifting some of the premium cost to his employees but fears younger workers would drop out.

"We've always believed we should take care of the people who take care of us," West said of his company's generous health benefits. "But it's getting to the point where I just can't absorb it. Especially when a lot of my competitors don't provide health benefits."

West's dilemma isn't unique. Cliff McBee, who runs a three-man garage in Palm Harbor, is under court order to provide health insurance to his ex-wife, who has multiple sclerosis. When his group health premium jumped nearly 50 percent in January, his employees threatened to leave the group. McBee, 61, had no choice but to pick up the increase. Now his company's premiums total $2,600 a month.

"For the past eight months, I've borrowed from this to pay that," he said. "The basket is empty."

Jim Pisani, owner of B Hive Awards and Advertising Specialties in Clearwater, said health insurance premiums that have risen more than 60 percent over the past two years are crippling his company.

"I may have to give my employees a bonus and tell them to buy their own insurance," he said of his 22-person work force. "This is decision time. These insurance increases are bringing us to our knees."

-- Kris Hundley can be reached at hundley@sptimes.com or (727-892-2996).

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