Businesses Feeling The Pinch As Health Insurance Premiums Spike

By: Michael C. Bailey
Published: 03/05/10

Deborah Converse, CEO of the Hyannis Area Chamber of Commerce, said she’s heard from local business owners who have seen their premiums for health insurance rise as high as 39 percent over the past year.

Wendy K. Northcross, president and CEO of the Cape Cod Chamber of Commerce, said her members have reported increases of up to 50 percent.

Richard Egan, who owns the Physical Therapy Centers in Osterville and Buzzards Bay, saw premiums for a family health insurance plan for his employees, offered through Blue Cross/Blue Shield, more than double over a two-year period, rising from $900 a year in 2008 to $1,850 this year.

More than a dozen business owners from Cape Cod and southeastern New England shared similar stories with Joseph G. Murphy, commissioner of the Massachusetts Division of Insurance (DOI), and Kevin Beagan, deputy commissioner and director of the State Rating Bureau within the DOI, who were in Barnstable Monday for the first in a series of six statewide hearings on how rising health insurance rates are affecting small businesses and their employees.

Under Massachusetts law, any business with 11 or more full-time equivalent employees must make health insurance available for its workers, and make a “fair and reasonable” contribution toward the premium. Businesses that fail to comply may be hit with stiff fines, which are assessed for the entire year even if there was as little of a month’s lapse in coverage.

“I’m terrified by this system,” Mr. Egan said, stating that the state mandate, coupled with a lack of cost controls, has allowed the health insurance industry to raise rates unchecked, leaving employers and employees alike struggling to cover the costs.

For many business owners, this has led to greatly reduced profits and an inability to expand their businesses or hire new employees. For employees, this means losing large chunks of their paychecks for a plan that often comes with a very high deductible.

Deborah Maguire, co-owner of Liam Maguire’s Irish Pub and Restaurant in Falmouth, said 10 of the restaurant’s 28 year-round employees take health benefits, which cost $386 per month for a single person plan and comes with a $2,000 deductible, and $986 per month for a family plan with a $4,000 deductible. One of Ms. Maguire’s employees, a bartender, loses $109 a week out of her check to pay her share of the premium for a family plan.

According to Mr. Murphy, the information collected at the hearings will be included in a report due by the end of the month to Governor Deval L. Patrick, to support the governor’s and the Legislature’s efforts to control rising health care costs for small businesses.

Last month Gov. Patrick filed legislation designed to support struggling small businesses, and one piece of that bill focused specifically on cost controls. The bill included a directive to the DOI to enact an emergency regulation requiring health insurance companies to file any proposed rate increases for small businesses.

Under the emergency regulations, which went into effect on February 10, the commissioner of insurance would have the authority to reject any rate increases deemed excessive in comparison to the benefits provided.

The bill would also require health insurance providers to create an affordable selective network plan for small businesses.

Many of the speaker’s at the hearing at Barnstable Town Hall mentioned another piece of legislation that promises relief: H. 4452, filed by State Representative Harriett L. Stanley (D – West Newbury).

The bill would require any health insurance provider doing business in Massachusetts to offer an “Affordable Health Plan” product to all businesses with 50 or fewer employees. These plans would have to provide benefits equivalent to the “Bronze”-level plans available through the Massachusetts Health Connector, but at a lower cost since the premiums would be charged at a group rate.

The Bronze plans come with higher deductibles and higher maximum out-of-pocket expense caps, and slightly higher co-payments as compared to the “Silver” and “Gold” coverage plans.

According to Eric Linzer, senior vice-president of public affairs and operations for the Massachusetts Association of Health Plans, an Affordable Health Plan offered through this legislation would reduce costs for consumers by 17 to 22 percent. For a single person age 30, this means an annual savings of $552 to $720 on premiums. For a 30-year-old on a family plan, the savings ranges from $1,896 to $2,448 a year.

Ms. Converse said another bill could provide small businesses with another option for obtaining lower-cost health insurance. H. 3452, filed by State Representative Steven M. Walsh (D – Lynn), would business to aggregate through a non-profit organization such as a chamber of commerce, which would be authorized to negotiate on behalf of its members a lower group rate.