Anthony Carnesi just can't take it anymore.
Stung by years of soaring insurance costs, the owner of a Manhattan-based business decided recently that he had no choice but to take radical remedial measures.
Although he'll offer a health care plan to a person he plans to hire, Mr. Carnesi won't pitch in a penny to allay its cost. ``It's just too expensive to pay for someone's health care, especially if they have a family,'' he says.
Mr. Carnesi ought to know. Not only is he a professional profitability consultant, but as a businessman insuring himself as a sole proprietor-taking on employees only when needed-he has seen his own individual benefits costs rise 30% over the last four years. That increase is more than double the rate of inflation. For his coverage next year, he will pay $341 per month, up from $260 per month in 1999.
Most small employers, even those who are looking at the far more typical 15% to 25% increases in premiums over last year alone, will not go as far as Mr. Carnesi-not yet, anyway. But it is clear that they will also be unable to shoulder the added financial burden themselves.
The battle to at least brake soaring health care costs is forcing small business owners to try everything from chasing special introductory offers by signing up with a new plan every year, to downgrading to the most basic HMO. One employer has gone so far as to enroll in a plan in Ulster County to take advantage of lower rates offered upstate.
``People are being forced to be as creative as possible,'' says David Solomons, senior vice president of Acordia Inc., a Manhattan insurance broker.
With insurance premiums expected to rise 14% for 2002, according to a survey of big companies by benefits consultant Towers Perrin, and likely to increase by even more for small firms, business owners have no choice. After all, the hikes not only come on the heels of average increases of 13% for 2001 and 12% the year before, but they are now accelerating just as the economy is beginning to slump.
Nick Chiechi, president of CS DesignWorks Inc., a six-employee Web design firm in Manhattan, is one of an increasing number of small business owners who shop for new health care bargains every year.
``Changing plans every year has been very fruitful,'' says Mr. Chiechi, who adds that although all the insurers deny it, most will discount their fees in the first year in an effort to win new business.
``We sign on for one year, and then by the next year, the rate doubles, and then we look for a new carrier,'' he says.
Major change
Switching plans may be traumatic for employees, but for their bosses it can bring significant savings. ``It's not a good thing to do, and you don't do it lightly,'' says Linda Rilotta, director of human resources for DualStar Communications, a broadband company in Long Island City, Queens.
Nonetheless, this year she is on the prowl once again, forced to do so by the company's insurance carrier, which wants to hike premiums by 25% after only one year of service. ``It feels like bait and switch,'' complains Ms. Rilotta.
Even some insurance industry executives concede that many carriers do just that. In other cases, they say, those sharp, second-year increases stem from carriers simply getting a better handle on their own coverage costs.
``It can take 18 months to two years to figure out, by evaluating experience, what the premium of a new plan should be,'' explains a spokesman for Empire Blue Cross Blue Shield.
For whatever reason, agile employers are always able to find at least one plan that is being offered at a significant discount. ``There's always someone coming out with better rates,'' says Barbara Martin, a Long Island insurance broker. This year, she's pitching Atlantis Health Care, which is offering self-employed people in New York City family coverage at $555 per month.
Whipsawed by the constant turnover in insurance carriers, some employees are beginning to balk. Dave Bolotsky, founder of online direct marketer UncommonGoods, found his employees up in arms about switching to a new plan after Oxford Health Plans Inc., their present carrier, hit the boss with a 20% premium increase. ``They didn't want to switch the plan, or pay more for it,'' says Mr. Bolotsky.
Unable to simply absorb the increase himself and out of time to search for an alternative, in the end Mr. Bolotsky stuck to the Oxford plan and its service levels. What he did, though, was to lessen the hit on his bottom line by increasing employee deductibles and co-payments. Those moves were enough to hold the increase in his premiums to just 2%.
Dean Georges, owner of Manhattan florist Irene Hayes Wadley & Smythe LeMoult, did much the same thing. ``We could have opted for lesser coverage, but I didn't think that was totally fair,'' says Mr. Georges. Instead, he now kicks in 60% of the cost of insurance, with each employee contributing 40%, compared with the 65-35 ratio in effect last year.
Shifting the responsibility
The pain, for both business owners and their employees, is unlikely to stop there. As rates continue to rise, brokers predict, more companies will opt to ratchet up co-pays and deductibles.
``Employers can save 5% to 8% on the premium with a $1,000 deductible, and another 7% to 9% by increasing co-pays,'' says Mr. Solomons, the insurance broker.
Some business owners will go further, having employees fund their own health insurance with no employer contribution. Nick Santangelo, the owner of Capeli Salon in Howard Beach, Queens, has taken a more unusual and circuitous route to holding his health benefits down.
He recently enrolled in a health plan based in Kingston, N.Y. The community rating is the lowest in the state, meaning that insurers charge less because they have historically had fewer claims there. He tapped into those lower rates by becoming a member of the Ulster County Arts Council.
The council offers a wide range of services for local artists, but has never marketed itself on its health insurance offerings. But when word got out about them, membership more than tripled, rising to 350 from just 100 in two years. ``You can pay Kingston rates to see New York City doctors,'' says Gerry Harrington, a board member of the arts council.
