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Higher insurance premiums affect small businesses

October 30, 2002

Increasing insurance premiums are hitting small businesses and no immediate relief is in sight, Blue Cross Blue Shield of Michigan officials said.

This year, premiums for Blue Cross Blue Shield Traditional, PPO and Point of Service products have grown by an average of 11.4 percent for all Michigan groups and 15.8 percent for Michigan businesses with under 100 employees. The insurance company expects statewide premium increases next year to average 22 percent for those employing less than 100.

National trend data shows small businesses were already hit hard in 2000 and 2001, with a premium increase of 14.5 percent, according to the Center for Studying Health System Change.

Percentage hikes are causing small business employers to seek out help from their insurance brokers to adjust their insurance plans.

“We’ve been working with retailers to proactively change coverage or deductibles, or switch to different co-pays to help them bring down the cost,” said Tom Scott, vice president of public affairs and communication at the Michigan Retailers Association. He said the association only sells Blue Cross insurance.

Scott said the association’s surveys show fewer employers are offering health benefits and others expect employees to pick up a greater share of the cost.

Helen Stojic, a spokeswoman for Blue Cross Blue Shield of Michigan, said small businesses are hit the hardest with higher premiums because of “adverse selections” in small groups insurance pools. Under current market pools, consumers can “cherry pick,” she said, explaining that “cherry picking” occurs when insurance companies offer lower rates to younger, healthier individuals at small businesses while offering higher rates to older, less healthy individuals. “This puts Blue Cross at a great disadvantage,” she said.

Stojic said Blue Cross charges one community rate for anyone in a particular group, and lately carriers have left the company’s community-rated pools with a disproportionate percentage of higher-risk individuals.

She also cited hospital costs, increased use of prescription drugs, technology and an aging population as other reasons for rising costs.

Howard Ballein, manager of the Student Book Store, 417 E. Grand River Ave., said the store is basically “absorbing the cost” and will continue to provide quality health care for its employees.

“There’s not much we can do,” he said. “You want your people to have insurance, right?”

Ballein said the store hasn’t thought about shifting extra costs to its employees.

“We want our employees to have insurance,” he said. “It’s important to have insurance. No one loves increases, but if hospitalization costs are going up someone has to pay for it.”

Yet, Blue Cross and the Michigan Retailers Association said some of those costs should be curbed by legislation that would reform the health insurance market by addressing the growing imbalance in the small-business market.

The association “has been calling for reform and actively working toward it so that our members can continue to afford health insurance for their businesses,” said James Hallan, the association’s president and CEO.

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