25% of Small Businesses Say Rising Health Premiums ‘Threaten’ Their Viability, Study Says

Nearly 25% of small business owners in Michigan say "feverish" health premiums "threaten" their ability to stay in business, according to a study released on April 28 by the Small Business Association of Michigan, the Detroit Free Press reports (Norris, Detroit Free Press, 4/29). The telephone survey of 304 randomly selected small business owners, commissioned by the SBAM, also found that the rate rose to 40% among businesses owned by women or minorities. Because of rising health care costs, 34% of survey respondents said they have lowered employees wages or limited pay increases; 29% reported hiring fewer employees; and 22% have borrowed money to cover increased costs. Still, only 3% of respondents reported that they had dropped employee health coverage. Instead, the survey indicated that the "standard response" has been to shift costs to workers: According to the survey, 43% of businesses have raised copayments; 36% have increased employee-paid deductibles; and 18% have increased the amount an employee contributes to the premium.

Time for Regulation?
SBAM officials, who want state legislators to enact regulatory controls that prevent insurers from "overpricing" policies, are using the survey's finding to "make a case for change," according to the Detroit News (Webster, Detroit News, 4/29). State regulators have recommended requiring insurers to rate small businesses by employee age, gender, health status and job and then to base premiums on the business's rating. The Free Press reports such changes -- expected to be included in legislation to be introduced "in the next few weeks" -- are directed at Blue Cross Blue Shield of Michigan, which controls approximately 70% of the small business market in the state but is currently only allowed to offer one "community rate" to small businesses. Blue Cross is also required by law to insure every business that applies. The insurer contends its competitors, which are allowed to offer different rates, "take advantage" of those requirements by offering lower rates to "healthy" businesses, leaving Blue Cross as a "repository" for the "sickest" small businesses. Blue Cross has lost more than $400 million in the past five years, despite double-digit premium increases that are expected to reach 20% as of July 1 (Detroit Free Press, 4/29).