What to do When Health Insurance Premiums Go Up
There are two things that are certain in life, death and taxes, or so the story goes. Well, a third certainty seems to be coming on the scene, annual increases in health insurance premiums. The state government has set forth rulings that restrict them to some degree; one in particular limits rate increases to only one occurrence per year. While that eliminates increases on an annoying monthly or quarterly basis it concentrates the increases into one surprising large annual increase. The second governmental restriction prevents insurers from singling out individuals for rate increases based on claims made. Increases are shared equally among all the similarly insured. The same is true of small businesses. This results in the complaints that "I didn't even have a claim last year and my rates just went up." There is really no way for an insurer to recoup the cost of a claim for a necessary open heart surgery from one insured by raising the premium on his policy only or on his small business plan. The insurer must spread the cost.
For individual plans, which are medically underwritten, escape from rate increases is limited. Changing insurance companies is doubtful for a person who has recently incurred sizable medical expenses-but it may be possible for healthy people. Reducing benefits by raising deductibles or co-pays is an option but questionable for the insured who is more prone to increased medical cost since he now has existing conditions that were not present when the policy was originally purchased.
For owners of small businesses that offer medical insurance to their employees, a major increase in group premiums poses a more complex dilemma.
Five Options For Small Businesses Come to Mind:
- Just cancel the whole plan. This is tempting but would probably create more problems than it solves. A refinement of this option is providing each employee with a cash amount to help them buy an individual policy. The major draw back of this approach is the employees, or dependents, with health problems may not be able to get coverage at any rate. This may result in the unintended loss of that employee and concerns of other employees as to their future.
- Just absorb the increased premium and just write it off. This assumes you have a way to pass that increased amount on to your customers in higher costs or that you are willing to reduce your business income. The comparison of, being between a rock and a hard place comes to mind.
- Reduce rates by reducing benefits, using a higher deductibles and raising co-pays on doctor's fees and prescription drugs. Employees that have been claim free may prefer this to increasing their premium cost. Employees who are experiencing medical costs may not be in favor of this approach. This move may serve towards putting the increased liability on those who have caused the increase.
- The owner may pass the increases directly on to all the employees. This solves one problem but creates another. The employee who has not utilized the plan to any great degree certainly will be less than happy about higher premium costs since he would feel that he did not contribute to the rate increase. If the business does not yet permit employees to share their premiums with pre-tax dollars, this should be considered. This may minimize cost the employees are being asked to share. Remember, this only works once. Passing the cost or part of it, on to all employees is, perhaps, fair but may be viewed by some as rewarding the employees who have incurred claims by penalizing the claim free employees.
- Get comprehensive quotes from other insurers. This is a process that takes time and assumes your expertise in the area of health insurance. Some business owners chose to avoid the hassle. Others may benefit from the effort. If your suppliers, both personal and for your business, increased your cost for their products 10% or more per year wouldn't you look around for a better deal. Inflation is a fact of life. Medical inflation, which is the increase in the cost of hospital, professional services, prescription drugs and other medical costs, is also a fact of life. If your premium increases by a multiple of this you may very well do some shopping. Remember that price is only one aspect of medical insurance. There are additional considerations to evaluate such as ease of use, which providers are in the plan and, of course, benefits.
In conclusion none of these approaches are best for everyone. Some may be better or less bad, for you.