Rising healthcare costs tax providers

Sunday, October 31, 2004

YARMOUTH, Maine - Five years ago, Pulmonary Health Services stopped paying 100% of its employees’ healthcare, and began requiring them to contribute 35%. This year, the Pittsburgh company’s healthcare plan raised prices 17%. Still, President Jim McGrath did not ask employees to boost their contribution. Next year, however, all bets are off.

“I’m trying to hold the line, realizing we are going to have to look at some real changes as we get into 2005,” McGrath said. “It’s really difficult, especially when you are a family business. I’m cutting my kids, and that makes it doubly hard.”

McGrath is hardly alone in his struggle with health-insurance costs, which have jumped an incredible 59% since 2001 - five times the rate of inflation. Small companies with fewer than 200 employees, which include most HMEs, have been hit hardest. On average they pay the highest premiums because with fewer employees, they present insurance companies with greater risk.

“I see those (healthcare) checks we send every month, and it kind of breaks your heart,” said Dennis Trach, regulatory compliance officer at Associated Healthcare in Amherst, N.Y. “I’d like to take one of those and run off to Mexico.”

HME’s face an additional problem: dwindling reimbursement. They can’t raise their prices to offset skyrocketing healthcare costs. Some providers have bit the bullet in recent years and not required employees to pick up a greater share of their healthcare insurance. More often than not, that is not the case. Employees may not like paying a greater share of their healthcare insurance, but they seem to understand why they must, say company owners and managers.

“It is an adjustment for the staff,” said Bob Simmons, owner of Boston Home Infusion, which two years ago increased its employee share of health insurance from 20% to 30%. “People frowned, and you say that it is just reality. Organizations can’t afford to pay the (increases). I explain that there are some companies where it is a 50/50 split.”

“Outside of salaries it is the biggest expenditure that we have and we want to offer it,” said Mario LaCute, president of Seeley Medical in Andover, Ohio. “It is not something to feel disgruntled about.”

That said, a company needs to keep an eye on its bottom line and maintain its profitability, said LaCute and others.

This past year, Seeley’s health insurer proposed an 18% increase. The two sides eventually settled on a 5% increase. The insurer relented on its initial offer, LaCute suspects, because of some changes in the network it was rolling out. Because of the small increase, Seeley didn’t increase its employee contribution, which now stands at 35%. But if the 18% boost had gone through, “we may have considered a 50/50 split” with employees. He doesn’t expect future negotiations with the insurer to go so well.

Unfortunately, when it comes to healthcare coverage and its spiraling costs, there appears to be no reprieve in sight.

“Insurers are all coming out with different levels, different copayments and tiers,” Simmons said. “Before you know it, you are going to have to hire some one to do nothing but look at employee insurance. It’s even confusing to me at times.”