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Rhode Island’s small businesses pay 10 percent more, on average, for the same health coverage than mid-sized and large employers, apparently due to their limited negotiating power, Health Insurance Commissioner Christopher F. Koller said last week.
Not surprisingly, small businesses are also dropping their health plans more than larger ones, or asking workers to pay bigger shares of the premiums to maintain coverage, Koller said.
And across the board, premiums are rising sharply, with almost half of Rhode Island employers – of all sizes – reporting annual hikes of 20 percent or more in the last three years. The average cost of a family plan, Koller said, now equals a year’s pay at minimum wage.
“We cannot allow these trends to continue,” Koller told members of the Greater Providence Chamber of Commerce at a breakfast presentation on Tuesday. The CEOs of both Blue Cross & Blue Shield of Rhode Island and UnitedHealthcare of New England sat in the audience.
Fifty-five percent of employers say health costs cut their profits in the last year, Koller said, and 39 percent say they forced them to reduce or eliminate pay raises or bonuses; 27 percent had to raise their prices; 20 percent cut other benefits; 18 percent delayed supply purchases.
“It’s clearly no longer just an HR issue – it’s affecting the whole business,” Koller said.
The data he cited came from preliminary findings of a statewide employer survey launched last spring to help guide Koller’s work. A similar survey was done in 1999, just before the 2000 reforms passed to try to make small-group health insurance more affordable.
Koller has pledged to do more for small businesses, and in a comprehensive health agenda he helped develop for Gov. Donald L. Carcieri, he set the goal of boosting the ranks of employer-insured small-business workers by 15 percent in five years.
Only 65 percent of employers with fewer than 10 workers provide health insurance, Koller’s survey found, compared with 82 percent of those with 10 to 24 workers, and 97 percent of those with 100 to 999 employees.
Eligibility rules have gotten tighter, however, Koller said, so only 80 percent of full-time workers at firms that offer coverage are now eligible, down from 92 percent in 1999. Part-timers, he added, “have fallen completely off the screen,” with very few getting insurance.
Koller said he was particularly struck by another clear distinction: between “low-wage” and higher-paying workplaces. Based on the share of workers earing under $22,000, employers were divided into two groups, and among the lower-paying ones, only 71 percent offered benefits, compared with 99 percent of higher-paying employers.
But even those who do get coverage, Koller noted, increasingly pay more. Only 21 percent of Rhode Island employers now pay the full premium for individual coverage, he said, down from 61 percent in 1999. And even as they pay more of their premiums, workers are also getting fewer benefits, he added: 20 percent of plans now have deductibles of $1,000 or more.
The result is that fewer workers are accepting their employers’ health plans, Koller said.
Perhaps some are just opting for their spouse’s plan, but many just go uninsured.
So what to do?
“I don’t have magic solutions for this problem,” Carcieri told the Chamber members after Koller’s presentation. “This is probably the most difficult public policy issue in the country. … If there was an easy and fast solution, we would’ve jumped on it a long time ago.”
Some would suggest that the best solution is to let small businesses “piggyback on the state’s programs,” Carcieri said – he didn’t specify, but one idea that’s been floated is allowing firms to buy into the RIte Care program. But that could wreck the system, he said, because it would encourage people to drop private insurance.
Another option might be what Massachusetts Gov. Mitt Romney is looking into, Carcieri said – mandatory insurance for all, “on the idea that everyone can afford something.”
“We’re not there yet,” Carcieri said, but “we’re working on it.” In the meantime, he has his broader health care agenda, he noted, and he outlined the basics: promoting wellness programs, promoting primary care and prevention (a “balanced” system), promoting health care information technology, helping small businesses, and improving the state’s purchasing.
At the end of the Chamber event, three business leaders were asked to respond to Koller and the governor, and all three said the survey results rang true to them, even if their own experiences weren’t always aligned with the averages.
Herb Gray, vice president for human resources at Cranston Print Works, an employee-owned company with about 500 workers, said in the last three years, their premiums have gone up 11 percent, 9 percent and 4 percent, but nevertheless, family premiums are now up to $13,300, nearly double the $7,300 cost in 1999. Overall, health insurance now costs about $4 million per year – the third-largest single expense for the $125-million company.
“The only thing we can do at Cranston Print Works is keep increasing the cost-sharing,” Gray said. But by working together, Gray added, employers could make a bigger difference. He’s heavily involved in the Rhode Island Business Group on Health, and he urged fellow Chamber members to join him.
Meredith A. Curren, owner and CEO of Pease & Curren, a Warwick precious-metal refiner with about 40 employees, said her annual premium hikes are roughly 20 percent, and every year, to control costs, she’s forced to do the same thing: cut back the coverage and increase workers’ share. “When I do that, I feel like a big jerk,” she said.
Curren said she supports a greater emphasis on wellness, as well as greater consumer education, but she also recommended two policy changes that would go against the grain of recent years’ legislation: reducing coverage mandates for specific services (Rhode Island is demanding when it comes to what plans must pay for), and restoring small employers’ right to group together for health care purchasing.
The latter right was taken away with the 2000 reforms, which instead gave small businesses a different protection: modified “community rating,” meaning that the base rate for all groups under 50 members is set based on their collective claims experience, and then insurers can adjust their rates only to a limited extent, by age, sex, family size and health status.
Koller said the reform narrowed the difference between the premiums paid by the healthiest and the least-healthy groups. But Kim Keough, spokeswoman for Blue Cross, said it may also account for the 10-percent difference between small and large groups that Koller cited.
Not that large groups have it easy, stressed Pierre LaPerriere, vice president and HR director at Gilbane Inc. His company spends about $16 million a year on health insurance, he said, and continually rising costs mean “we reduce profits and raise prices.”
Insurers could help make things better, LaPerriere said, by providing “clear, concise and actionable” information about the costs underlying premiums, and by providing far more “value-added services” such as health education programs.
What about bringing more carriers into the market?
It won’t work, Koller said. It might reduce administrative costs, he said, and it will result in better customer service. It will probably lead to “some short-term gains” in prices.
“More competition won’t get at the underlying costs,” he said. “And you need a critical mass to run an insurance company.”
