Health benefits aren’t secure, businesses say

Published 10:28 pm Sunday, June 22, 2008

LYNNWOOD — Kim Johnson is feeling the squeeze of rising health insurance costs on businesses.

The charges for insuring the 78 employees of Espresso Connection went up 20 percent this year, said Johnson, the company’s controller.

For the past several years, the company has offered health benefits to all its employees, including its 60 baristas, she said.

The double whammy of rising insurance costs in a weakening economy has left the company facing tough choices: Cutting health insurance to some of its employees, switching to individual health plans or not offering health insurance at all.

“I wish we could solve it some other way,” Johnson said.

But with a weakening economy, “people aren’t going to pay $4 for a latte when they’re paying $4 for a gallon of gas,” she said.

A survey being released today of 407 Washington businesses, conducted by AARP, found similar warning signs about the future of health-care programs offered by employers.

“People who have jobs … feel a sense of security that we’ll always have health-care benefits,” said Jason Erskine, a spokesman for AARP’s state chapter.

The survey results are a wake-up call, he said, that “the health-care benefits we all enjoy aren’t as secure as we thought.”

Among the findings:

n The overall monthly cost of health insurance for an employee with no dependents has increased about $114, or 32 percent, for Washington employers in the past three years.

n Monthly costs for an employee with no dependents nearly doubled among smaller-sized companies with two to nine employees, increasing about $327, or 91 percent, in the same period.

n If current cost trends continue, about 65 percent of Washington employers will consider passing on to employees more of the costs of premiums, deductibles and co-pays.

Employers have “break points” for when they stop providing health insurance, the survey found. If costs increased by 15 percent, 27 percent of employers say they would drop health insurance; 40 percent would stop providing it if the costs increased by 25 percent.

The telephone survey, which cost $15,000, was conducted between March 20 and April 1. Businesses were randomly selected, but small, medium and large companies were included, Erskin said.

The survey is part of a national effort by AARP, the National Federation of Independent Businesses, the Service Employees International Union and the Business Roundtable to press for solutions to rising health-insurance costs and get health care for the uninsured.

Troy Nichols, Washington director of the National Federation of Independent Business, said it’s unusual for these groups to join together on a political issue.

“This issue is so important, we can’t let it slip” from the national discussion, he said.

The organization represents 8,500 small businesses in Washington; they have an average of five employees and gross sales of $350,000.

“Affordability of health insurance has been our members’ No. 1 issue for decades now,” Nichols said.

Nationally, insurance premiums for member businesses have increased 130 percent since 2000, he said. On average, small businesses pay out 20 percent more for health insurance than large companies, due in part to the smaller number of employees to spread the expenses of providing health care.

Seth Swetman, owner of Snohomish-based America’s Best Heating and Air Conditioning, said he first began offering health-care benefits about 18 months ago.

“The costs are pretty high,” he said.

Rising health-care costs are just one of the challenges he’s facing. While he’s added trucks to his growing businesses, his costs for gas have skyrocketed in the last year, he said.

“To date, I haven’t looked at health care to try to cut some costs,” Swetman said. “But it’s one of those things that I have to look at. Is it possible to cut anything back?”

The Everett Clinic spends just under $7 million a year on health insurance for its 275 physicians and 1,700 other staff members and their dependents, said Rick Cooper, chief executive.

With wellness programs and other cost-conscious efforts, the organization was able to avoid premium increases in 2005 and 2006, he said, but costs increased 7 percent last year.

Glenda Krull, an Edmonds real estate agent, has seen her rates for an individual health insurance plan — one not provided by an employer — increase from $1,375 a month in 2005 for herself and her husband to $1,875 now.

Her husband had a liver transplant in 2004. She worries that the benefits for the $5,000-a-month medication that has just been prescribed for him will soon max out. She said she’s been paying premiums for 15 years.

“Most of my real estate peers don’t even have insurance,” she said. “It’s too hard to afford.”

Reporter Sharon Salyer: 425-339-3486 or salyer@heraldnet.com.

Survey findings

Highlights of a survey of 407 Washington businesses about health-care costs:

n One-third of those who offer employee health insurance think it will be difficult for the company to provide health insurance over the next three years.

n The overall monthly cost of health insurance for an employee with no dependents has increased about $114, or 32 percent, for Washington employers in the past three years.

n Monthly costs for an employee with no dependents nearly doubled among smaller-sized companies with two to nine employees, increasing about $327, or 91 percent, in the same period.

n If current cost trends continue, about 65 percent of Washington employers will consider passing on to employees more of the costs of premiums, deductibles and co-pays.

n If employee health coverage costs increased by 15 percent, 27 percent of employers say they would stop providing coverage, and 40 percent would stop providing it if the costs increased by 25 percent.

n Among employers who do not currently offer employee health coverage, about one-third have done so in the past.

Source: AARP Washington