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HEALTH CARE Rising premium costs squeeze small businesses



Published: Sun, May 12, 2002 @ 12:00 a.m.



Health-care costs have jumped 20 percent for Ohio small businesses.

By DON SHILLING

VINDICATOR BUSINESS EDITOR

YOUNGSTOWN -- Rapidly rising health-care costs have business owners scrambling to cut costs or cut their profits.

For many, rising prices is out of the question.

Sandy Zander, owner of Union Square Sparkle in Youngstown, is dealing with health-care premiums that have gone up 33 percent in the past 18 months.

"I can't raise my grocery costs. People won't shop here," he said.

Businesses in other industries also can't raise prices.

Orlando White, vice president of Vinylume in Austintown, said competition is too stiff in the replacement window industry to allow for his company to rise the price of its windows even though its insurance premiums have gone up 21 percent this year.

At Quint's Auto Body in Boardman, a 14 percent increase in December is hard for the five-employee company to handle.

Joe DeSantis, shop co-owner, said auto insurers aren't taking health-care increases into account when they figure what they will pay to fix a car.

"I have to do enough business to make a profit and pay my bills," he said.

Small businesses across Ohio are struggling with the same problem, said Ty Pine, assistant state director of the National Federation of Independent Businesses (NFIB).

A recent survey of 2,000 small businesses in Ohio showed health-care premiums rose by an average of 20 percent in the past year.

Premiums have been going up by double digits for years, but many in the industry expect increases of 20 percent or more in the next few years, Pine said.

Coping

To deal with this year's increase, Vinylume increased its employees' share of premiums from $25 a month to $75 a month.

Company executives struggled with the decision to raise the employees' share because they know employees need money for other family expenses, White said.

"It wasn't easy," he said.

The company also had to reduce the starting pay rate for new employees to free up cash for the insurance premiums, which increased from $280,000 a year to $340,000 a year for the 75-employee company.

Zander said that after three rate increases in the past 18 months, his grocery store is paying more than $500 a month for insurance for each full-time employee. He pays the full cost of the premiums, but the insurance plan is selected by union officials who represent 20,000 grocery store workers in northeast Ohio.

To pay for the health-care increases, Zander has to watch other costs that he can control, such as advertising and the number of hours that employees work. He said he has to be aware of the trends at his store so that he has enough workers scheduled for busy weeks but not too many for the weeks when business is slower.

The best hope for holding down the premium increases is an improving economy, said Zander. He said he thinks premiums are increasing by large amounts because insurance companies aren't getting large returns in the stock market.

Holding down costs

Pine said the NFIB is trying to hold down costs by lobbying against health-care mandates, such as those requiring coverage for diabetes or mental health. Sixteen proposals regarding health care are pending in the state legislature.

Each time a mandate is added to provide coverage for a certain disease, health-care costs go up, Pine said.

Small businesses suffer the most because large businesses are exempt from state health-care laws, he said.

Other factors forcing up health-care costs are rising liability insurance premiums, increasing research costs for prescription drugs and higher use of health-care services, he said.

Also, small businesses aren't able to spread out their high-cost cases, said Pine. If one employee at a small business has a disease that requires expensive care, the premiums for that company will go up significantly, he said.

This happened to Superior Printing in Warren this year. Because of expensive care required by a few employees, the company's experience rating worsened, and it was hit with a proposal calling for a 48 percent increase in premiums.

The company redesigned the plan to increase deductibles and co-payments so the premiums increase ended up at 25 percent, said Bob Smallwood, Superior Printing's chief financial officer.

He said the company pays 100 percent of the premiums, but that is becoming hard to afford because of the large increases.

"It's coming right off our bottom line," he said.

Big problem

While the recent premium increases are large, the rising price of health care is nothing new for business owners. Pine said NFIB surveys show that it has been small business owners' No. 1 concern for the past 20 years.

That doesn't surprise Lou Schepka, president of Steel Valley Design in Struthers. Steel Valley Design eliminated health-care coverage for employees a year ago.

The decision was made partly on premium increases and partly on a decline in business. The company makes machinery for steel mills, so it has been hit hard by that industry's downturn. It used to employ 18 but now employs only six.

He said the steel industry is starting to come back, but his business is in a difficult position. In order to attract quality employees, the business needs to offer health benefits but it can't afford that right now.

"Health care is the biggest problem for small businesses today -- a huge problem," Schepka said.

shilling@vindy.com




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