10 August 2009

Small businesses and insurers

TNR's The Treatment points out one unpleasant practice in our current health insurance system:
Insurers must renew policies for small groups from one year to the next, even if members of that group file large claims. But insurers can get around this by raising premiums to the point where smaller companies must cut benefits drastically, stop offering coverage altogether, or raise premiums to the point where employees can't afford to buy it. [...]

So let's say CIGNA's cost of providing coverage rises 5 percent one year. They company could increase rates to a business by an additional 15 percent, so that coverage might cost 20 percent more. Many individuals and small employers would have to drop coverage.

Not that the risks are limited to small businesses and their employees. Mid-size companies feel the impact, too. The rate-increase limits apply only to companies with fewer than 50 employees. Once a company hires its 51st worker, it loses that protection, meaning an insurer would have unlimited ability to raise rates from one year to the next. Large companies can sustain this because they "self-insure"--that is, they pay for their employees' medical expenses out of their own funds, hiring insurers only to administer the policies. But companies that don't insure, ones with closer to 50 employees, wouldn't have that luxury.
We've run into this many times with our medical practice.  It's incredibly hard to even get competitive bids when we go shopping for insurance; if we get three insurance companies that are willing to consider selling us insurance, that's huge.   And when someone gets sick, it's been pretty apparent that the insurer wanted nothing more to do with us when the next rate increase came due.  I've an interesting position: As a doctor and patient advocate I have a strong interest in reforming health insurance, but I also have an equally strong interest in reform from the perspective of the owner of a small business.

Remember: the heart of "ObamaCare," as it's being called, is insurance regulation reform.


  1. This is why we need community rating and all policies available to anyone in the area at the same price for any given level of coverage. It wouldn't matter if they were an individual, a small business or a big corporation.

    A discount of a couple of dollars a month per policy for billing multiple people would be reasonable.

    With that kind of system you would not need to develop insurance exchange pools, etc. And there would be no more need for COBRA coverage since the individual could just continue to pay for the same insurance on their own if they chose to.

  2. I would like to see real insurance reform.

    I'd like to see single-payer even more, though.

    Thanks for a wonderful blog.

  3. This is interesting. My question is, are CATS covered under Obama family health care plan?


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