The inflation rate for 2004 was 2.7 percent. That’s the highest rate since 2000 when inflation was measured at 3.5 percent. Inflation has not been at double-digit rates since 1981 when it was 11.2 percent. The worst inflation rate of the past 25 years was in 1980 when it hit 14.3 percent.
Keep those figures in mind. The costs of health care premiums for employers and their workers have been rising annually from 15 percent to 25 percent in recent years. How can insurance companies raise premiums by 25 percent when the rate of inflation is below 3 percent?
The short answer is because they can. There’s nothing to stop them from raising prices to any level they want. There are no regulations in Pennsylvania to prohibits these outrageous increases by commercial insurance carriers.
Politicians in Harrisburg know about the problem. They just haven’t made it a priority. In the meantime, small employers are forced to pay more to provide health care coverage for their workers or pass those increases onto the workers and their families.
This is especially troubling for companies who have 100 or fewer workers. But this issue hits home with just about everyone. If this trend is not reversed, companies will simply stop offering health coverage as part of their benefits coverage. That means workers will have to rely on taxpayer-funded programs such as Medicaid or CHIP to cover their family’s health expenses. That means higher taxes for everyone to pay for these programs.
Companies may also decide not to hire more workers because of the high cost of providing health coverage. That means more unemployment. And guess who pays more in taxes to cover unemployment benefits?
Two area insurance agents are very familiar with the dilemma in health care coverage. Ronald H. Back is president of the Ron Black Agency in Royersford. Charles A. Laskey Jr. is vice president. They’ve been in the business for decades. They pride themselves in finding the right insurance at the right price for any of their clients. But it’s getting harder to do their job.
Before this starts sounding like a commercial for the Ron Black Agency, let me say that I have no connection to the firm whatsoever. Ron Black asked me if I would write about this issue and provided me with copies of the legislation. That’s my only dealing with the firm.
Black and Laskey feel so strongly about this issue that they devote a portion of their firm’s Web site to educating the public about the current health coverage dilemma. They’ve spoken to business groups, appeared on local television to discuss the issue and traveled to Harrisburg to testify before legislative committees.
Black and Laskey wholeheartedly supported bills in the state House and Senate to remedy the problem. The legislation (Senate Bill 671 and House Bill 1891) was introduced during the 2003-2004 session. Both bills were referred to their respective insurance committees, but neither made it out of committee for a vote.
Passage of these bills wouldn’t benefit the Ron Black Agency’s bottom line. Black and Laskey want to see reform because they care deeply about their customers, including many of the local businesses that provide jobs for area residents. Black and Laskey talk to these business owners regularly and they feel their pain. They want to find affordable health insurance for these firms, but that’s becoming harder to do in Pennsylvania.
The legislation seeks to ban "demographic rating" and medical underwriting in the small employer market. If passed, insurance companies would no longer be allowed to charge a business a higher rate because that firm has older workers or a lot of women working there. The insurance companies would have to use "community rating" to determine what they charge. This is what Blue Cross/Blue Shield does. That would bring rates down for everyone because the costs are spread out over all employers in a region.
One of the more interesting sections on the Ron Black Agency’s Web site deals with the question of what would happen if the Senate and House bills are not passed:
* Rates will rise more drastically. Companies with an average age of workers over 45 could see a 30 percent to 40 percent rate increase.
* Employers may be forced to discriminate when hiring new employees in order to keep their average age down. They’ll hire young men instead of women or more experienced workers.
* Employers may be forced to pass more of the increased health insurance premiums onto their employees (which is what many firms are already doing).
* Employers may be forced to offer plans with higher deductibles and co-pays to their employees in order to keep insurance premiums down. (See above).
* Employers may be forced to eliminate their health insurance plans altogether because of the soaring costs.
This is a complex issue but the solution is common sense. The state Senate and House need to enact legislation to deal with this problem. Since the two bills never made it out of committee, somebody needs to stand up in the Legislature and introduce the measures again.
I urge you to contact your state senator and representative and get them behind this legislation. Every worker and taxpayer in the Commonwealth needs speak up. I will continue to write about this issue until Gov. Ed Rendell signs legislation to curb the skyrocketing costs of health insurance.
E-mail Tony Phyrillas at tphyrillas@pottsmerc.com
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