Double Digit Health Insurance Hikes Crush Small Businesses

Small businesses across the country are getting hammered by rising medical insurance costs. Blue Shield of California is jacking up rates as much as 76%.

Is this what president Obama meant when he said "Change You Can Believe In"?

The LA Times reports Health insurance rate hikes hitting California small businesses could hurt state's economic recovery.

Small businesses in California are being hit this year with double-digit hikes in health insurance costs that could hurt the state's economic recovery as companies curtail plans for hiring and expansion to pay their insurance bills.

Five major insurers in California's small-business market are raising rates 12% to 23% for firms with fewer than 50 employees, according to a survey by The Times.

Similar increases are being felt by many small businesses across the nation, including those in Texas, Ohio and Florida — mainly the result of escalating costs for medical care and pharmaceuticals, insurers say.

In California, some small businesses say they are stunned by their latest insurance bills. Longtime customers of Blue Shield of California, for instance, are facing rate hikes as high as 76% after the insurer lost money on a handful of plans.

"We don't have that money," said Ann Terranova, a San Francisco financial planner who is dropping Blue Shield for herself and two employees after learning that their annual premium would jump to more than $19,000 a year from $11,000.

Financial pressures are also squeezing Tessier Cabinet Co., a 59-year-old family business in Montclair. Its president is reluctant to hire because of weak demand for his goods amid a 14% rate hike from Kaiser Permanente. "I'm ready to hang it up," Dan Tessier said.

Small firms nationwide are struggling with the problem as they worry about what the effect of the new national healthcare law. It will impose billions of dollars in taxes on insurance companies and require mid-sized firms to provide insurance for workers or pay fines.

"They are very concerned that their costs aren't going to go down. They're just going to go up," said Stephanie Cathcart, a spokeswoman for the National Federation of Independent Business in Washington. "They're going to be paying new taxes, new fees. It's kind of a double whammy on them."

Small businesses say 2010 is shaping up to be their most expensive year yet, leaving them with few good choices. They say they can pass charges along to employees, reduce benefits, cancel insurance programs or raise the price of goods — an option few are willing to entertain because of competitive pressures.

Blue Shield, for example, miscalculated the cost for three plans that pay all medical expenses once customers meet thresholds for out-of-pocket expenses. The San Francisco insurer is now raising premiums as much as 76% for some small businesses.

"It turns out that people used a lot more medical care than we had anticipated," said Tom Epstein, Blue Shield's vice president of public affairs. "We need to increase the rates to cover the medical costs. We can't lose money on these products."

Many small firms say they feel a duty to provide health insurance, or see it as a necessary cost to attract qualified job candidates. Either way, they predict that a continued rise in their healthcare bills will dampen their prospects for recovery.

"Our margins will dwindle to nothing," said Bill Thomas, chief executive of U.S. Technical, an engineering firm in Fullerton. "It's the beginning of the end."

There are lots more examples of rising costs in the article.

Sadly, the bill rammed through Congress does nothing about containing costs. All it did was force more people into the system and put more burden on small businesses and individuals to do so.

The health insurance bill has an alleged cost of a $trillion. It will be higher. No government program ever costs less than anticipated. Moreover, one needs to factor in unseen costs, such as driving small businesses out of business.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List