Small business owners and entrepreneurs throughout the US are facing impossible choices because of the skyrocketing costs of health insurance premiums, and, in many cases, the lack of access to coverage. Here are some of their stories.
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Proximo Consulting | New York, NY
New York IT consultant:
Trying a temporary fix for high health costs
Small firm outsources HR to reduce insurance bill
David Ricciardi and his business partner have been optimizing their clients' information technology systems for more than 10 years, growing their business in a crowded Manhattan marketplace. But they've had a harder time making the most of their own health insurance benefits.
Company President Ricciardi and CEO Martin Fellner watched their premiums rise rapidly, by 25 percent one year and 50 percent the next. In 2002 they tried something new-outsourcing their human resources functions to a third party, known as a professional employer organization (PEO). It made sense to hand over the increasingly complex task of negotiating benefits for their 12 full-time employees to a consultant who specializes in HR. After all, they ask their own clients to hand over their IT strategizing to the experts at Proximo.
And for a while, things were better, Ricciardi says. "They cut our insurance bills a lot, and it made up for the cost of having a PEO," says Ricciardi.
"This year we're hit with a 40 percent increase. So now we're reevaluating again what to do."
Costs go up for employees; business expansion slowed
But the savings were short-lived. Even a benefits specialist couldn't shield Proximo from the huge premium hikes prevalent in the small-group health insurance market. "This year we're hit with a 40 percent increase," Ricciardi says. "So now we're reevaluating again what to do."
To stay competitive in hiring IT specialists, Proximo has to offer health insurance benefits. But as the cost goes up the company has had to both absorb some of the increase and pass some of it along to workers. "We pick up 100 percent of the cost of a single employee's coverage," says Ricciardi. "Next year we'll wind up picking up the same amount as last year but we won't give employees as much insurance. Employees will pay more out of pocket."
Meanwhile, the partners have less to spend on growing their business. "It comes out of research and development of our products, out of sales, office space or something else we could have given employees," says Ricciardi. "It winds up affecting something somewhere."
"An exchange should give us more reasonable costs."
Reform needed even if the results are uncertain
Ricciardi wants to see reform, and he's hopeful that a health insurance exchange would give small businesses more options and bring the price of coverage down. "An exchange should give us more reasonable costs," he says. He'd also like to see cost controls built into the system to restrain the runaway medical spending that's made healthcare so expensive and inefficient.
Ricciardi isn't sure that the direction Congress is going will attain those goals in the short term. "It's all very well-intentioned," he says. "But it will take a few years to see what happens.
Nevertheless, he believes Congress has to keep working to make the best reform bill possible. "It's a big, complex issue," he says. "But we definitely need reforms."