By Tim Bonfield
The Cincinnati Enquirer
For those who think the rising costs of health benefits have been tough on corporate America, try paying for benefits as part of a small business or as a self-employed worker.
Not only do small businesses and self-employed people have more trouble affording the rising costs of health insurance, experts say their employees are less able to cope with uncovered bills.
"Rising costs for small businesses lead more directly to people becoming uninsured," said Alwyn Cassil, spokeswoman for the Washington, D.C.-based Center for Studying Health System Change.
"Small employers are less likely to offer health insurance. And because small employers tend to employ more lower-wage workers, the employees are less likely to accept whatever health benefits are offered."
Concerns about the potential impact of rising health insurance costs are widely shared among Tristate small businesses and agencies that deal with the casualties of benefit cutbacks.
Up until four years ago, Monmouth Jewelers paid 100 percent of the monthly premium for about a dozen employees at its stores in Newport and Alexandria, Ky. Each year since, employees have been asked to pay a bigger share - 5 percent, then 10 percent, then 15 percent, then 20 percent.
This year, Monmouth's president, Steve Levinson, offered to switch to a different, cheaper health plan, but he changed course after employees said they would prefer to keep the plan they had even if it meant paying 25 percent of the premium.
"I was really surprised. But they didn't want higher deductibles," Mr. Levinson said.
Meanwhile, Joe DeVille, a self-employed resident from Harrison, considers having any kind of health coverage a blessing. Mr. DeVille works with his wife, Pam, in a tiny start-up company called enCompass I.T., which offers recruiting services for computer-related personnel.
"When I was an employee at a bigger company, I took all that stuff for granted. But now, as a small business owner, I think, wow, did I have it nice," Mr. DeVille said. "It is a lot rougher out there for small businesses."
Last month, a group of 27 large Cincinnati employers surprised many in the health benefits field by reporting they kept health benefit cost increases to 2.6 percent in 2002 compared to national trends exceeding 10 percent. But there are no signs that such cost-control success has trickled down to small businesses.
In fact, smaller employers have suffered sharper price increases for health benefits than larger employers for the past several years. This gap matters, experts say, because troubles facing small businesses are more likely to increase demand on budget-pinched state Medicaid programs and more likely to push families into bankruptcy over uncovered health bills.
In 2001, 99 percent of employers with 200 or more workers offered health benefits, compared to 76 percent of employers with 10-24 workers and 58 percent of companies with three to nine workers, according to the Kaiser Family Foundation.
Most big companies also offer multiple health plan options while most small employers don't. Nearly 60 percent of companies with 5,000 workers offered at least three health plan choices in 2001. So did 27 percent of companies with 200 to 1,000 workers.
But among employers with three to 100 workers, just 2 percent offered three choices, 7 percent offered two choices and 91 percent offered one health plan, according to the Kaiser Foundation.
That single choice has steadily become more expensive, which has resulted in higher out-of-pocket costs for employees, and in many cases, weaker benefits when people get sick.
While companies nationwide with at least 200 workers were fretting about benefit increases that averaged 10.2 percent in 2002, companies employing two to 50 workers were struggling with 14.5 percent rate hikes, according to the Center for Studying Health System Change.
Similar gaps have occurred each year back to 1998, the center reports.
At Monmouth Jewelers, these think-tank statistics translate into real-world tough choices for employees - choices many more Americans are likely to face if health care costs continue to spiral.
Mr. Levinson had hired an insurance broker to shop for a better deal. The new plan he found would have saved the company money and would have resulted in lower paycheck deductions for workers. The catch: increased co-payments and deductibles for care and a more restricted list of covered providers.
Employees opted to keep the old plan.
"I've got one young guy who's single who is paying 25 percent of $138 a month. I've got another young guy with children who's paying 25 percent of $600 a month," Mr. Levinson said.
"That's quite a bit. But I know some stores where they've dropped coverage to just the employee and not the family. That would be a big change."
Some employers have decided for competitive reasons to maintain strong benefits despite rising costs.
Ande Weinstein founded Tinbox Studio in 1993, a four-employee graphic design firm. He still pays 100 percent of monthly premiums for an HMO that offers generous benefits despite a 28 percent rate hike this year.
"Our increases were pretty reasonable for the last 10 years - 3 percent, 5 percent, 9 percent. Then last year we got hit with a pretty enormous jump," Mr. Weinstein said.
"But we can't not provide insurance from a competitive point of view. We offer the kind of benefits you can find at most big companies. My wife and I wouldn't go without health insurance, so we can't expect our employees to go without either."
To save money, many other employers, especially small ones, are considering health plans that sharply increase deductibles for care, reduce covered benefits, limit who can be covered or all of the above. Such changes can leave a family exposed to thousands of dollars in uncovered bills should a serious illness occur.
Some families are prepared to handle the blow. But many aren't.
As a result, more families are seeking help from agencies like the Legal Aid Society of Greater Cincinnati, including more bankruptcy cases linked to big health care bills.
Legal Aid is part of a group of organizations that recently formed the Greater Cincinnati Healthcare Access Project to raise awareness about the growing costs of being underinsured.
"Five years ago, we didn't see health care raised as an issue much at all. But now, we're seeing people in low-wage jobs where the employer won't offer health insurance or the worker is opting out because they can't afford the premiums," said Trey Daly, a senior Legal Aid attorney.
Now, 47 percent of Legal Aid clients are citing health care bills as a key reason for seeking bankruptcy protection. The average debt reported exceeds $5,000, according to an access project report issued earlier this year.
One Wyoming woman cited in the report filed for bankruptcy after an uncovered heart surgery and related care rang up a $40,000 bill.
All it takes is one serious illness, a layoff, or even a divorce to play havoc with health coverage and turn the family budget into shambles, Mr. Daly said.
What worries Mr. Daly is that employers are shifting costs to workers and cutting coverage at the same time Ohio and many other states are facing budget crunches.
In recent years, Medicaid programs in many states, including Ohio, have been expanded to cover more uninsured children and uncovered working parents. But Mr. Daly questions how long the existing programs can last, much less be expanded to meet rising demand.
"This is a scary combination of events,'' Mr. Daly said. "There is tremendous fiscal pressure on the Medicaid program. And if employer-based health benefits become unaffordable, we're going to see a bigger increase in the numbers of uninsured."
E-mail tbonfield@enquirer .com
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