By C. Grant Jackson, Business Editor, The State
The health insurance premium for Don Purcell’s three small businesses rose 18 percent to 20 percent last year.
Purcell, who runs Spring Valley Auto Body, Express Rent-A-Car and Long Creek Equestrian Center with 23 full-time employees, is facing the biggest problem of small business today: How to provide health insurance to workers without breaking the bank.
The cost and availability of health insurance recently tied with taxes as the most important problem facing small business in a survey by the National Federation of Independent Businesses.
It is a double-edged sword: The cost of small-group health insurance keeps rising, and fewer insurers are providing it.
A preliminary study in 2000 by the state Department of Insurance indicated a looming insurance crisis in South Carolina.
Most people buy health insurance through their employer, said Gwendolyn Fuller, who oversaw the study. Because South Carolina is small and largely rural, most people work in small businesses, defined as anywhere from two to 50 employees.
According to the department, three-fourths of workers ages 19-64 are offered health insurance coverage through their job. The cost of coverage and family income often determine whether coverage is accepted or declined, if it is even offered.
As small businesses have cut insurance or increased the cost to employees, the number of uninsured in South Carolina has grown.
In 1987, about 12 percent of South Carolina’s population had no health insurance, according to the U.S. Census Bureau.
Today, 20 percent of S.C. residents have no health insurance.
“Interestingly, eight of 10 of the uninsured are members of working families,” according to the Department of Insurance.
Purcell’s premiums have been going up steadily, at least 10 percent a year for the last several years. Last year it was worse.
Some small businesses have given up providing health insurance. Others, such as Purcell, have chosen plans that require considerable employee contribution.
“We have a $250 deductible and a $500 out-of-pocket,” said Purcell, who also is president of the Greater Columbia Chamber of Commerce.
But that was by employee choice. “Everyone took a look at the plans and they voted,” he said. “The guys chose it. Last time we looked, they said, ‘Stay where we are.’‘ ”
But as the premiums go up, Purcell may have to find another plan.
That may not be easy. Just like nationwide, fewer insurers in South Carolina are writing health insurance policies for small groups.
The number of companies writing small-group insurance policies fell from 72 in 1997 to 32 at the start of 2001. Today there are 31.
Two companies, Blue Cross and Blue Shield of South Carolina and Carolina Health Plan, now have more than half of the market.
But small business doesn’t fault the insurance industry, said Frank Knapp Jr., executive director of The South Carolina Small Business Chamber of Commerce.
“Health insurance companies have simply found it is difficult to make money in small-group business,” Knapp said.
“They are in business to make money. If they can’t make money, they are going to do like anybody else: They are going to get out and do something else. You can’t blame them.
“However, that doesn’t alleviate the need for small groups to have health insurance.”
SEEKING A SOLUTION
To try to find some answers to the dilemma, the small business chamber is working with the S.C. Department of Insurance.
The Department of Insurance recently applied for a $1.7 million federal grant to study who the uninsured are in South Carolina and why, and also what can be done about keeping rates low so that people don’t lose insurance.
Fuller said the study would target small employers.
If the state receives the U.S. Department of Health and Human Services grant, the study would begin July 1 and conclude by June 30, 2003.
The plan for a formal study came out of the preliminary report the Insurance Department did in 2000 that looked at the shrinking numbers of insurers writing small-group coverage and the rising cost of coverage.
The small business chamber’s Knapp calls it not only a crisis for small business, but also a public health crisis.
“It is imperative that small businesses be able to offer health insurance. Otherwise, we will have more people in this state – in this country – be uninsured, which is not good for the public health,” he said.
Small business also see it as an issue of competitiveness. “Small businesses need health insurance because they’ve got to compete with bigger businesses for employees. They’ve got to offer employee benefits,” Knapp said.
If the state receives the federal grant, it will be one step toward trying to find answers to the small-group health insurance crisis.
The study will fund data collection and analysis to determine who the insured are in South Carolina, review trends in employment-based health insurance, and look at possible areas for state involvement and help come up with solutions.
As part of the study, the South Carolina Health Insurance Policy Advisory Committee – a group of consumers, health, insurance and government professionals – would be formed to make policy recommendations for public officials.
A public Health Insurance Forum is planned for May 2003 to bring together the public, members of the General Assembly, other political leaders and members of the insurance and medical communities to review the data and begin discussion of possible solutions.
All that will occur only if the state receives the federal grant.
But grant or no grant, the state must find some solutions to the problem of affordable health insurance for small businesses.