7/6/2001 San Francisco Business Times (Brendan Doherty) Peter Lee is trying to do something about the rising costs of health-care insurance, but says industrywide pressures and the extra costs of administering small business plans have tied his hands.
The CEO of the Pacific Business Group on Health is in charge of PacAdvantage, a purchasing pool for small businesses. And, just like everyone else in the industry, PBGH had to raise the small business rates within PacAdvantage by an average of about 13 percent.
The small business rates paid in California for policies this year by businesses with fewer than 50 employees rose an average of 20 percent, after an average increase of 17 percent last year, according to a new study by Managed Care Online, a Modesto-based health-care information company.
By way of comparison, for midsized groups with 50 to 999 workers, rates went up an average of 4.5 percent, after 13.1 percent hikes in 2000. Employers with more than 1,000 workers paid 7.3 percent more, down from 8.2 percent last year. And individuals, who were socked by an average rate increase of 18.3 percent in 2000, paid 9 percent more this year.
"This confirms our gut feelings about small employers," says Lee. "They are the first and hardest-hit when the rates go up, and they have the smallest margins."
Small business plans, sources say, are harder and more costly to administer. A small business purchasing pool contains a patchwork of little contracts, instead of few large corporate contracts covering thousands of employees each. The risk pool is also more difficult to predict within small groups. Interestingly, the small-group health insurance rates are going up at a faster rate than the rates for individuals.
"This is the third year we've done the study, and there continue to be some surprises," says Clive Riddle, president of MCOL. "We are starting to see (increases) coming down for many sectors."
By the numbers
The study, which looked at policies in effect for the first four months of 2001, showed huge cost variance by location.
Using Sacramento County as a base, rates in Alameda and Contra Costa counties varied little from the base, but other counties in the Bay Area, including Marin, San Francisco and San Mateo were 4 percent to 8 percent higher. Monterey County is the priciest in the state, but the next eight most expensive counties are all in rural Northern California. The nine least expensive counties are in Southern California.
Health plan rates have been surging back up after steady declines in the mid-1990s. "Small, medium or large, it's been a nightmare," says Dean Forman of the benefits brokerage Genovese, Forman & Burford Financial and Insurance.
