Area businesses adapt to insurance premium ills

REGION – Last fall, when Blue Cross Blue Shield of Michigan announced 2001 rate increases for area-rated small groups (fewer than 100 employees), I frankly didn’t pay much attention. My business’ renewal date wasn’t until June–seemingly light years away. Plus, I figured, as a sole proprietor insured through the Chamber of Commerce program I wouldn’t see an increase in the range being bandied about–20 to 25 percent–like other businesses would.

Apathy turned to apoplexy when earlier this spring I received notice of my increase, nearly 61 percent! I was shocked, then prompted to ask a few questions: were sole proprietors getting the short end of the rate hike stick; what were the alternatives; and how were other small business owners responding to their new rates?

BCBS of Michigan insures 189,000 people in the Grand Traverse region, according to Frank Smith, sales manager for the Traverse City area. Losses are heaviest in single subscriber groups, he says.

“For every dollar we take in, we were paying $1.50. You can’t do business very long like that. When you get into the sole proprietor market, you can tend to see adverse selection; people who need insurance buy it and then use it. Those that don’t need it don’t buy it. We want to provide access to those people (who need it), but we also need to make it stable. It wasn’t stable.”

There are options, explains Barry Riske, owner of Riske, Brown & Associates in Suttons Bay.

“Priority Health, Fortis Benefits and Physicians Care are some of the companies we’ll show, but clients haven’t wanted to go with them because there are few participating doctors.” Of Riske’s clients, 100 percent have stayed with Blue Cross.

In terms of price, these other companies don’t beat BCBS either.

“It’s not just Blue Cross Blue Shield,” says Hal Van Sumeren, president of the Traverse City Area Chamber of Commerce, where nearly 50 percent of members are insured with BCBS through the member benefit program. “Employers are finding the same increases, or more, among everyone in the health insurance business.”

Riske has been holding two to three meetings each day with employer groups insured with Blue Cross to “help them work through it.” Options include increasing office visit and drug co-payments and deductibles, or dropping prescription coverage altogether, though Riske says only a “very few” are going that route.

“It’s all over the map,” he says. “It depends on what works for the group. No one’s happy about it, but rates in this area are still five percent less than Bay City/Saginaw, 24 percent less than the U.P. and 30 percent less than Detroit.”

Mike Kittendorf, owner of North Bay Bioscience in Traverse City, was facing a 26 percent increase. He chose a program with identical benefits but higher deductibles for his 20 insured employees, which increased premiums by only 6 percent. In response to the 2000 rate increase, the company passed along 10 percent of the premium cost to employees. This year, it has absorbed the entire increase, bringing annual expenditures to about $4,000 per employee.

“In the end it all worked out pretty well, but we’re still really concerned about next year and beyond. There comes a point in the financial picture of a small company where you just have to say, ‘We can’t take on any more,’ and then it gets passed to the employees. But at least we’re set for one more year.”

Jodi Maas, office manager for Traverse Dental Associates, PC, in Traverse City, says the practice was facing a 22 percent increase for its 16 insureds if it stayed with the same BCBS plan.

“The employees were pretty understanding. We went through everything, talked about options and what we needed to do for our business. We looked at other companies. Sure, we might save money, but if the doctors you use aren’t on the list, how much of a benefit is it really?”

The practice chose an alternate plan with higher office visit and drug co-pays but otherwise identical benefits, netting a 17 rather than 22 percent increase, according to Maas.

“One thing employers are not doing is dropping the program, due largely to the tight labor market,” says Van Sumeren. “It’s a real good employee perk.”

Kittendorf agrees. “It helps keep turnover lower and is an additional incentive when it’s hard to find good people, like recently. It also keeps employees more able to focus on work if they don’t have to worry about paying the doctor bills.”

Though it’s too early to know for sure, BCBS’s Smith says that next year northern Michigan employers “probably won’t see the same percentage increases” as they did in 2001.

“Blue Cross and others are doing what they can to contain costs, but there’s only so much they can do. Utilization is a factor, and at some point lifestyle has something to do with it,” says Van Sumeren. “But it’s certainly a cost employers are going to be very conscious of over the next few years.”

Kimberlee Roth owns Outword, LLC Professional Writing, PO Box 3314 Traverse City, 49685. Reach her at 938.0640 or 938.2933 (fax); BN