California Health Insurers Squeeze Small Business Owners With Double-digit Rate Increases

Might be time for Steve Poizner to come in from the campaign trail and have a look at the newest rate increases. According to the LA Times, the Gang o

Might be time for Steve Poizner to come in from the campaign trail and have a look at the newest rate increases. According to the LA Times, the Gang of Five here in California is ganging up on small business owners with less than 50 employees.

Five major insurers in California's small-business market are raising rates 12% to 23% for firms with fewer than 50 employees, according to a survey by The Times.

Similar increases are being felt by many small businesses across the nation, including those in Texas, Ohio and Florida — mainly the result of escalating costs for medical care and pharmaceuticals, insurers say.

Insurers claim they either underpriced their policies or had unusually high claims.

Blue Shield, for example, said hospital charges rose nearly 20% last year, while physician costs and pharmaceutical fees increased almost as much. Anthem Blue Cross also cited the cost of medical care in explaining its average rate hikes of 13% this year.

"We understand that one group that has been most hard hit by the economic downturn of the past few years is the state's more than 3 million small businesses, who we all rely on to be major contributors to our local economy," Anthem spokeswoman Peggy Hinz said.

"We want to be competitive in the marketplace, but we also want to take care of our members," Hinz added. "We work each day to do both."

Forgive me if I'm skeptical of this. It seems suspect to me that the group slammed with high increases is the same group who is eligible for a Federal tax credit of up to 35%. Further, why wasn't that tax credit mentioned in any of the reports about the rate increases? The employers they use as examples are likely to be the same ones eligible for the 35% break.

Why not mention that in this context, LA Times?

I have heard anecdotal reports that health insurance agents here in California representing one of these companies are visiting small business clients and telling them the apocalypse is upon them. Statements range from claims of outlandish premium increases to the outright falsehood that employers will only have one plan to choose from after reform. They begin by informing employers who they finally managed to shift into high deductible plans with Health Savings Accounts that HSAs are dead. (They're not dead, just reduced to reflect improved insurance options).

By the time they're done, they've convinced these small business owners that Satan lives in the form of health care reform. This is no different than what they did when California passed laws limiting auto insurers' rate increases. While these stories are anecdotal and not indicative of a widespread policy on the part of those companies, it still strikes me as part of a larger strategy to undermine confidence in the health care reform law.

What we have here is a group hissy fit thrown by the insurers who, until now, have had complete freedom to raise rates and lower benefits at will. While increases may be warranted in some cases, there's no reason to believe they're warranted to this extent or only on this group. It seems to me they chose the most vulnerable and least powerful group to pick on.

Kevin Drum has exactly the right answer for the insurers' woes:

If conservatives want to avoid the specter of federally funded single-payer healthcare in the United States, this is what they need to come to terms with. Canada provides high quality healthcare for everyone — including small businesses and the elderly — for a cost per person of about $4,000 per year. Ditto for France and the Netherlands. Britain and Japan do it for about $3,000. Ann Terranova is being asked to pay more than $6,000 per person — and that's for three working-age employees.

Insurers know single payer is still a hammer over their heads. We're seeing Vermont adopt an experimental program with it now. If it's successful, I expect other states to try it. Here in California, it's only a governor's signature away, provided we actually elect the right Governor.

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