Helping Small Business With Health Care

TW: I used to live the story below. In a small business we faced 10-20% annual insurance increases annually. And that was without being "purged" due to someone in our company becoming seriously ill or injured. Folks forget that not only do individuals have little leverage with insurance companies but groups smaller than at least 300 have little leverage. We shopped our business more or less every year because we had to although the potential insurance companies (the handful available and interested in small company business) knew this and began to reflect our lack of "loyalty" in their quotes.

This does not make the insurance companies bad people, they were merely being rational business folks. But something better is needed. The current health care reforms would help small businesses by providing exchanges or a public option in which to pool with others.

From Business Week:
"When it comes to health insurance, entrepreneurs are in a state of sticker shock. And it's not just the initial quote that has the power to astound. It's the wild premium increase that can accompany a single employee's unfortunate diagnosis. Wendell Potter, the retired director of media relations for Cigna, says those increases aren't always intended merely to cover insurers' costs. Instead, he says, they're sometimes levied with the aim of forcing a small company to drop its health insurance policy.

In June testimony before the Senate Commerce Committee, Potter said insurers "dump small businesses whose employees' medical claims exceed what insurance underwriters expected. All it takes is one illness or accident among employees at a small business to prompt an insurance company to hike the next year's premiums so high that the employer has to cut benefits, shop for another carrier, or stop offering coverage altogether—leaving workers uninsured. The practice is known in the industry as purging."

...Not all entrepreneurs are equally vulnerable. About a dozen states prohibit insurers from basing premiums for businesses with 50 or fewer employees on workers' health status. But in roughly three-fourths of the country, so-called ratings bands allow for considerable flexibility in pricing. In states with loose ratings bands, such as Texas and Nevada, one small company can be charged nearly 70% more than another. In Pennsylvania and Virginia, there are no ratings restrictions. No matter what state you're in, ratings bands don't apply to companies with more than 50 employees.

Compounding the problem is the fact that entrepreneurs, if slapped with hefty premium increases, may end up with fewer alternatives. In half of the states in the country, according to a 2008 survey by the Government Accountability Office, the largest small-business insurer has 47% or more of the market; in Alabama, one carrier insures 96% of all small businesses.

...A health insurance exchange, should it become part of a reform package, would provide protection against sudden rate hikes. However, even such a measure might exclude small companies with more than 20 employees. Says Nichols: "I'm very concerned about this. It will leave a lot of small businesses unprotected. The size really should go up to protect all firms that are not big enough to self-insure"—those with about 300 employees, he says. But the current proposals leave Biotest and thousands of similar companies out in the cold."
http://www.businessweek.com/magazine/content/09_36/b4145060711057.htm?chan=magazine+channel_what%27s+next