This is topic What the heck has happened with insurance costs? in forum Books, Films, Food and Culture at Hatrack River Forum.


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Posted by Belle (Member # 2314) on :
 
Our business liability and workman's compensation has gone up so high we can't pay it anymore.

Nor are we alone - we know four businesses that have folded in the last few months. And one that laid off half its workforce - all of them cited the rise in insurance premiums as a major factor.

Of course, working without insurance is not a good thing to do. We laid off two workers (half our workforce) and are seriously considering shutting down altogether.

We've been shopping around, and no one has rates we can afford. One quoted 12% of last year's gross. We don't even make that much profit.

Another quote was for a monthly premium that was more than the combined salaries of the two men we laid off.

If you're wondering what we did to increase the premiums - absolutely nothing. We've had only one claim on liability in six years and it was for less than $2000. It was also more than two years ago. We've never had a claim on workman's comp.

It's gotten to where I just cry in frustration. For six years my husband's worked to build a business with hopes of having something to pass down to our children, and we're at the point now where it's no longer worth it. Between taxes and insurance and the licenses and fees (we pay thousands of dollars a year in business licenses and paid out over $5000 last year in permit fees) there's just no money left at the end of the day for us. He'd almost make more money flipping hamburgers at McDonald's.

Not worth it. So once again, for the second time in about a year, we're looking at closing shop and selling all our equipment. He talks to someone tomorrow about a job with them. Which would mean letting our other two employees go, which I hate. These guys have families just like we do. But what can you do?

I swear I think the deck is stacked against small businesses. At least in the construction industry. One friend of ours said their workman's comp hasn't gone up and it's quite reasonable. I told him I was sure it was - since he was a payroll company with only office employees. Not so in the construction industry. If this keeps up no one is going to be able to afford a house - because the contractors are all going to have their prices so much, and all that will be left are the big companies - the little ones like us will all have been driven into the ground.
 

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Posted by mackillian (Member # 586) on :
 
That blows.
 

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Posted by Chris Bridges (Member # 1138) on :
 
I didn't see any "here's why it's happening" stories right offhand, but a Google search for "rising insurance premiums small businesses" brought up an awful lot of similar stories.

Also various legislation in the works to band-aid it.
 

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Posted by fugu13 (Member # 2859) on :
 
I suspect the insurance rise may actually be due to some bad and overly conservative investments on the part of insurers.
 

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Posted by Belle (Member # 2314) on :
 
Well, even if there is a bandaid - we're done.

It's just too much stress for too little payoff.

Wes has already talked to someone who has offered a job, they're just meeting tomorrow to hammer out specifics. He wants Wes to work for him (he's been pursuing him for more than a year) and we've been tempted before - this time it's a no-brainer.

Operate a business that's losing money or work for someone else for a steady salary? gee...I wonder which one makes the most sense.
 

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Posted by Bob_Scopatz (Member # 1227) on :
 
That's so sad.

I think the factors are pretty clear:

1) The cost of civil suits has been cited as one factor, but it's not really all that big of one. The insurance industry has been using the issue, however, to press for legislation to cap awards in civil suits.

2) Industry profits are down a bit and that's got the insurance companies trying to figure out new ways to boost the bottom line.

3) Many states have ceased to effectively regulate their insurance industries. The companies that work nationally have a few tactics they use: refusing to take new customers in a state, cutting deals where there are parts of the state that are unregulated (or people there just can't get insurance), and trying to force states to pass laws that benefit insurers. When they can't raise prices in a highly regulated state, they have to do it somewhere else. The deregulated states suffer.

But don't worry. The free market will correct all of this.



Sorry about your business, Belle. That sucks.
 

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Posted by Belle (Member # 2314) on :
 
It's funny - I'm upset but relieved at the same time. Man, it will be good to have a regular salary coming in. And the responsibility we feel for our employees - it's a big one. There have been pay periods where we paid them out of our own pocket because the business didn't have enough in its account. Just to know that their paychecks aren't our responsibility anymore is a huge relief.

Wes is calling in every favor he knows to help find them other jobs - it's tough because so many companies are laying off folks too. We think we've found a position for one of them.

At the end of the day we'll be all right. We may even be better off financially when all is said and done.

It does suck because we had hopes of building something that would last and would be there to hand down to our kids - but closing it down is the right thing for the family right now.

I just keep thinking about people who aren't in as good a shape as we are. After all, this was our secondary income - we still have the income Wes makes as a firefighter. One day I'll be working again. What about people whose business is their sole source of income? I know people like that - a member of our church has a landscaping company and is facing the same crisis we are - unable to pay premiums and unable to operate without them (no one wants to be without insurance - too big of a risk)

He has no other source of income. So, while I know we'll be fine, I'm upset for those that may not be. And angry that it came to this. So much work and effort over the last six years to have to shut down not because we couldn't hack it, not because we weren't doing jobs and doing them well, not because we ran out of work - but for insurance premiums.
 

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Posted by TomDavidson (Member # 124) on :
 
Had you considered joining a buyer's consortium?
 

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Posted by Belle (Member # 2314) on :
 
Well, it's all done.

We notified everybody, and our employees came by and dropped off all the equipment that belonged to us.

Two of them, who are licensed plumbers, may continue to work. Some of our contractors have indicated they'd let them keep on the jobs, and Wes agreed to help them out by pulling permits and such where needed.

It was very sad. A bit traumatic for both of us, but it's all done and over with. He has a new job, will wind up making more money for less stress. So, more than likely we'll be okay when all is said and done. It's just emotionally tough, even when you know you're doing the right thing for your family, to let go of something you've worked so hard on, and to let the dream of being a successful business owner die.

My sister-in-law is a CPA who specializes in small business accounting and she told us our story is not unique - she's been part of shutting down more than a few small businesses this year.

Man it's frustrating - to know you weren't beaten by competition, you were regulated to death. Between insurance, taxes, fees, licenses, it was all just too much.
 

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Posted by KarlEd (Member # 571) on :
 
Belle, I'm so sorry for you guys. That really sucks. It like the death of the American Dream, really. You'd think this country above all would reward that kind of enterprise and initiative, but sometimes it seems like the system is rigged to make millionaires into billionaires at the expense of everyone else.
 

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Posted by Elizabeth (Member # 5218) on :
 
I'm sorry, Belle, but maybe it will be a good thng in the long run. I hope so!
 

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Posted by ludosti (Member # 1772) on :
 
I'm sorry to hear you guys had to let go of your dream. I'm glad though that Wes was able to find a job and that everything will work out pretty well.

I can understand how frustrating it is. I work for a very small company (there are 3 of us, including my boss, here full time) and my boss often complains about what a huge drain the taxes and insurance are. In our case health insurance has been the major problem (I've not heard of huge increases in our workman's comp and other insurances). I know that this year they wanted to basically double our rates. It is absurd. I guess we are lucky that we are not in the construction industry. Our business and income has been staying ahead of the costs of operation enough that we are moving to a larger facility next week, with possible plans to hire another person. It is scary to me though to think of what would happen if we had a bad year.
 

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Posted by Jay (Member # 5786) on :
 
This just passed the WV Senate Senate Passes Third Party Bill 27-6

The bill eliminates what are called Third Party Bad Faith Lawsuits.

Not sure about all this sort of thing.
WHo knows.
 

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Posted by holden (Member # 7351) on :
 
Belle, I am so sorry. I also own a business and can identify with what you are going through. Best of luck with everything.

This is probably not the thread for a discussion about the free market....but since Bob brought it up I just have to point out the irony of his statement. Did it ever occur to you Bob that the reason the free market can't correct the problem is precisely because it is not a free market in many places? Just asking.
 

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Posted by Farmgirl (Member # 5567) on :
 
And here I wanted to own my own business someday.....

.
.....maybe not.

((hugs to Belle and hubby))

Farmgirl
 

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Posted by Katarain (Member # 6659) on :
 
First of all, I had no idea things were so bad for small businesses. You have my sympathy, Belle, and I'm sorry it had to come to shutting down the business. I'm glad you guys will be okay, and it's nice to hear that you care so much about your employees.

Second of all, Holden, what do you mean by not a free market in many places? I'm not challenging, I just would like some clarification. Do you mean it's not free because of the regulations?

-Katarain
 

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Posted by TMedina (Member # 6649) on :
 
You still can Farmgirl - but you will have to be aware of the costs involved as they pertain specifically to your business.

Workman's Comp in the construction trade is absurd because it's a relatively high risk field and insurance companies are...yes, well...I don't have a good opinion there.

The regulations and whatnot will also vary by location, which is another factor to take into consideration.

-Trevor
 

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Posted by TomDavidson (Member # 124) on :
 
"Did it ever occur to you Bob that the reason the free market can't correct the problem is precisely because it is not a free market in many places?"

Which regulation, holden, do you think is needlessly inflating insurance costs?
 

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Posted by fugu13 (Member # 2859) on :
 
Actually, I predict a free market in insurance would be heavily prejudiced against small businesses. Larger businesses do deal in economies of scale, and their bureaucratic structures will keep transaction costs down for insurance companies doing business with them, where with small businesses the bureaucracy must exist much more on the insurance company end.
 

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Posted by Bob_Scopatz (Member # 1227) on :
 
A free market? When insurance company execs are being indicted for collusion?

Hmm...I think the best we could hope for is them eventually deciding that it's not in their best interests to bankrupt EVERYONE in order to line their own pockets.
 

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Posted by holden (Member # 7351) on :
 
Yes Katarain, that is exactly what I mean.

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When they can't raise prices in a highly regulated state, they have to do it somewhere else. The deregulated states suffer.

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Government regulation can make a market more free. For example, a requirement that health insurance companies create an "open group" and allow anyone to join it at published rates would make a more free market than we have now. Efficient insurance companies would do better under such a system.

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One needless regulation that I have had personal experience with (probably not relevant to Belle's situation) is that in some states the government requires health insurance companies to cover pregnancy. Every policy issued to a female must cover pregnancy whether she has any intention of becoming pregnant or not. This forces women that don't get pregnant to subsidize the insurance premiums of those that do.

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This forces women that don't get pregnant to subsidize the insurance premiums of those that do.

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Unless we get really sick, I'm fairly sure that even with having several doctor's appointments a year, we'll pay the insurance company far more than they have to pay for us. Far more.

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The vast majority of people have to pay more for health insurance than they get out of it each year, or the system wouldn't work. You pay $4200 per year, probably a max of $5000 counting a LOT of co-pays and deductibles.

If you paid the max, you probably would be getting more out, but let's use $5000 per person per year.

One person with a $50,000 bill will offset about 9 other people who get NOTHING out of the insurance plan. As a whole, those 10 people will cause the insurance company to break even, nothing more.

If each person got $2500 out of the insurance company, 19 people will be needed.

Dagonee
 

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Posted by beverly (Member # 6246) on :
 
I'm sorry, Belle. I really admire people who go into business for themselves because it is so tough. I think I am a person who isn't brave enough to face the frightening odds and would prefer "safety" with a steady salary. But that's just timid ol' me.

Hope you are pleased with how things turn out.
 

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Posted by Katarain (Member # 6659) on :
 
Okay.. Good points all, Dagonee.

But what about them raising rates? (Although I'm not sure that my medical insurance would go up because I use it--since it's through my employer, everybody pretty much gets the same rates according to their plan.)

I am talking about something I know little about. I just wish I had more of my paycheck to take home, that's all..

-Katarain
 

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Posted by Dagonee (Member # 5818) on :
 

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I've heard a program on NPR where an insurance company executive explained how this would be bad because insurance companies would simply stop doing business in any state that required them to do open group, and how "most people" would end up paying more for insurance than they do now.

It sounded logical as he was saying it, but it also didn't make sense five minutes later. I mean, if the market is large enough, they could figure out a way to make money, no?

Surely if ALL states went this route, the industry would adjust...

It's just that now they don't have to.

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But what about them raising rates? (Although I'm not sure that my medical insurance would go up because I use it--since it's through my employer, everybody pretty much gets the same rates according to their plan.)

I am talking about something I know little about. I just wish I had more of my paycheck to take home, that's all.

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The hardest thing for me to figure out is how to handle pre-existing conditions. There needs to be some way to keep someone from gettng insurance for 3 months just to handle a particular condition, but it's unfair to penalize people who have had to delay medical insurance for financial reasons.

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This is the hardest thing. Under many policies you can not receive treatment for a pre-existing for a certain amount of time to be eligible for the plan. Well that just isn't possible for some people, like my son for instance. If he didn't receive medication or treatment for his transplant for any length of time he would reject his heart, need far more $$ procedures and very likely die. But there is absolutely no way we could pay out of pocket for his expenses. Just one of his medications is over $700 a month All 4 medications total just over $1000 a month. As much as I hate having to take government help we have to have him on state medical because otherwise he would die. We have no means, especially while we are both in school, to support three growing children and ourselves and keep S in medication. Sigh. I hate insurance worries.
 

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Posted by holden (Member # 7351) on :
 

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And we also all know that insurance companies would NEVER EVER refuse to cover a pregnancy. After all, it is preventable and the woman CLEARLY intended it. If I jabbed a pen in my eye intentionally, why should the insurance company cover it?

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I am only saying that the government is interfering in our freedom of choice leading to inefficiency. I don't believe that women who can't or don't want to get pregnant should be forced by the government to pay for those that do. Dag's example is much better one and more relevant to the situation. When the government mandates that insurance companies cover events that a person or business does not consider an insurable need, premiums are forced higher. This has nothing to do with insurance companies being evil. They exist to make a profit like every other business. Individual companies and people in any industry have and will push the limits of ethical havior. Sensible government regulations should be in place to punish collusion and other anti-competitive activity.
 

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Posted by TMedina (Member # 6649) on :
 
Let's tack on prescription drug prices on to the list of social ills we're griping about today.

-Trevor
 

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Posted by Bob_Scopatz (Member # 1227) on :
 
Actually, I seriously doubt that the cost of the overall risk of being a young male driver is higher than the cost of being a woman of child-bearing age. Per capita, more of these women will have babies in any given year than young men will have serious traffic accidents resulting in severe injury or death.

I think... Never done the comparison, but I think our annual number of births far outstrips the number of serious accidents.

I think the cost of a pregnancy is in the $20,000 range, of which insurance would pick up something like 80 to 90% right?

How many child-bearing-age females are in the population? How many children are born each year? To how many women???

the cost of a traffic fatality is $1 Million up to $4 million depending on what's included in the estimated costs. But there are only 42,000 of them per year (only?!!! ) Most traffic events are relatively minor and the cost estimates for the injuries are let's say, about $20,000 (to make it comparable. But how many of those events are caused by a young male driver?

If we compared THAT number to the numbers we got for # births to how many females of child-bearing age, I guess we could figure out the costs.

The thing that worries me about this is that really EVERYONE should contribute to the insurance pool for births. We want them, right? This is what a society is all about, isn't it? I mean, even if people said they don't want children, they wouldn't want a society without children...

It's a cost of having a society. It's not an illness.

Sheesh.

It's like education, people wouldn't want to only have parents fund education, would they? Surely society benefits from having educated children...

I don't think pregnancy should be entirely a health-insurance issue. We should have a minimum standard of care for all pregnant women and it should be funded by society as a whole, not be only for those with health insurance and not paid for only by those who MIGHT get pregnant.

Weird.
 

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Posted by holden (Member # 7351) on :
 

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That is pretty stupid. Almost like charging people who don't get sick to pay higher premiums to cover the people who do get sick.

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I don't think pregnancy should be entirely a health-insurance issue. We should have a minimum standard of care for all pregnant women and it should be funded by society as a whole, not be only for those with health insurance and not paid for only by those who MIGHT get pregnant.

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The point is that insurance companies in some places can offer women a choice: You can buy policy A that does not cover pregnancy for $200 per month, or you can buy policy B that does cover pregnancy for $400 per month.

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Except it wouldn't be $200 and $400. Just by the selection the insurance company would know that the people opting for the higher insurance are very likely to have children. So the difference would likely be in the $500-$1000 range.

Besides, this would keep men from ever sharing the costs of pregnancies, which would seem to require partitioning off all the different possible risks. Which would render many people uninsurable.

Dagonee
Edit: Thanks for that info, Bob. I figured that's how it would come out, but had no way to actually figure it out.

[ March 25, 2005, 04:55 PM: Message edited by: Dagonee ]
 

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Posted by TMedina (Member # 6649) on :
 
Sorry Kat - the instant you hold two views, one belonging to one side of the political fence and the other on the opposing side, you get shifted to "moderate" by default.

-Trevor
 

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Posted by Katarain (Member # 6659) on :
 
Oh. I can live with moderate. I've thought of myself as moderate before.

I'm usually just puzzled... like how I can agree with them liberals on so many things but be so annoyed by them at the same time. I also agree with the conservatives on so many things.

Guns Good.
Environment Good.
Low Taxes Good.
Socialized Medicine Good.
Small Government Good.
Equal rights good.
Affirmative Action bad.
Legalization good.
War necessary.
Diplomacy good to a point..

Yeah.. moderate. okay.

/derailment

-Katarain
 

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Posted by holden (Member # 7351) on :
 

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Except it wouldn't be $200 and $400. Just by the selection the insurance company would know that the people opting for the higher insurance are very likely to have children. So the difference would likely be in the $500-$1000 range

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I think the best way to pay for prenatal and maternity care is socialized medicine

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Are you in favor of socialized medicine in general? Or just for maternity care?
 

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Posted by holden (Member # 7351) on :
 
Sorry Bob you are too fast. You already answered my question.
 

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Posted by Bob_Scopatz (Member # 1227) on :
 
Curse of the fast fingers.



Socialized all the way...

I think we should contract our medical care to Canada and just let them move in.
 

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Posted by Dagonee (Member # 5818) on :
 
I'm againts it - I just want the open groups.

If we decide people who can't afford coverage need government assistance, then we should buy them appropriate coverage on the open market.

We need to consolidate all the forms of assistance. Figure out a reasonable amount people need to live safely, with adequately food, healthcare, and housing. Set assistance levels based on that. Get rid of hundreds of government programs and reduce them to providing cash.

Then select programs for ensuring availability of health care (the group plan) or affordable housing (don't know how to do that) or child care and make the benefits of these available to anyone. Make sure the actual monetary assistance can cover the needed fees for those who need it.

We need something to help with the incentive problem, but I think it works.

Dagonee
 

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Posted by holden (Member # 7351) on :
 
Top ten things people believe about Canadian health care but shouldn't

We have a big problem in this country with health care. I don't have all of the answers but turning it over to the government to handle seems like a recipe for disaster.
 

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Posted by TomDavidson (Member # 124) on :
 
holden, you're very lucky that Sara Sasse's in Ottawa right now for a medical conference and isn't here to rip you a new one.
 

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Posted by holden (Member # 7351) on :
 
I don't know much about Sara but I would hope she wouldn't "rip me a new one" for being opposed to socialized medicine. I don't think I have said anything offensive or derogatory.
 

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Posted by Morbo (Member # 5309) on :
 
Holden, that article makes some good points, but some are pretty laughable:

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[exerpted from]Number Seven: "Free" Health Care Empowers the Poor
And by depriving them [the poor] of the power of payment within the health care system, Medicare disempowers them. And the poor see this, because while they may be poor, they are not stupid.

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Because obviously, the poor would be empowered, nay, ennobled by "access" to health care they have no way to pay for. I'm sure the poor are all clamoring for an end to socialized medicine. The main "evidence" supporting the conclusion of #7 was an anecdotal incident involving the author's middle-class girlfriend.

Also, the author acknowledges that Canada's health system is better than the US, though flawed, and it costs less per capita and as a percentage of GDP.
 

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Posted by rivka (Member # 4859) on :
 

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Getting pregnant is not like getting cancer. You don't just wake up one day pregnant through no fault of your own. If you feel you have an insurable risk, pay for the insurance, if not the government shouldn't force you.

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• As Bob pointed out, having kids is (or should be) the concern of every member of society. Making sure they are healthy (and helping moms get prenatal care is an important way to do that) CERTAINLY is everyone's concern.
• BC is not 100% effective. If you are a female of childbearing age, there is a non-zero chance (unless you are celibate) that you will become pregnant.
• Most (if not all) cancers are at least partly caused/triggered by preventable behaviors. Diet, smoking, sun exposure, pollutants (which are both contributed to by actions of individuals (like driving and using household cleaners), and higher in various areas, where people have made the choice to live), lack of exercise, etc.

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I think the cost of a pregnancy is in the $20,000 range, of which insurance would pick up something like 80 to 90% right?

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Bob, it's been over 5 years since I last had a kid, but $20,000 sounds awfully high for a natural uncomplicated birth. My memory is more like $8,000 - 10,000 at the low end, and only as high as $20,000 with serious complications and/or a C-section.
(Google is not helping. It's giving me lots of costs in yen . . . )

Percentage covered by insurance would depend on type of insurance (traditional, HMO, PPO) and some other factors, but yeah 80-90% would be about average, I think.
 

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Posted by seriousfun (Member # 4732) on :
 
The only thing that consistently tracks the general increase in insurance rates over the last 15 years in the US is: the profitability of the insurance companies (with insurance company CEO compensation a close second).

Claims track inflation, and lawsuits (resulting in some of the "hot coffee" type of egregious settlements) are way down the list.

(start here for info: www.fdic.gov/bank/statistical/)

Insurance is so funny...one of the only things that you have to have (sometimes by law) that you can't use, because if you do, they take it away...

Sorry that this was the straw that broke the camel's back, for your small business.
 

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Posted by Bob_Scopatz (Member # 1227) on :
 
1) Canada pays less per capita and has better health outcome than the US.

2) The Canadian system ensures that everybody has at least a minimum level of care. US cost estimates don't include the costs of NOT treating people and probably doesn't show what it costs when those are written off as debt by hospitals.

3) Universal insurance with ALL US citizens treated as one insurance pool would be just fine with me. That way, everyone would know what it costs to be insured at whatever level they feel they need. It wouldn't depend on whether your company is huge or tiny, or you are self-employed or even unemployed. You can get insurance and it costs $X/month. Why is that impossible? How would that make it a thing that government would screw up?

One of my primary objections to the current system is that it is balanced on the back of small business and the self-employed. Since the majority of job growth in the US is through small business, we are letting the insurance industry basically kill our economy. Belle's business is by no means alone.
 

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Posted by Elizabeth (Member # 5218) on :
 
Eeek. We went through a period of time when we were unemployed and uninsured. It was so scary.

My plasmapheresis alone(blood cleansing, basically) cost $6,000 for the blood alone, not including the machine and all that. I had it done seven times. I was in the hospital for two weeks, and a week in rehab. If we were not insured, we would be in big trouble.

When I hear of friends who are risking it, I just shudder, and worry so much!
 

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Posted by Bob_Scopatz (Member # 1227) on :
 
holden...

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Founded in 1973, The Heritage Foundation is a research and educational institute - a think tank - whose mission is to formulate and promote conservative public policies based on the principles of free enterprise, limited government, individual freedom, traditional American values, and a strong national defense.

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One of my primary objections to the current system is that it is balanced on the back of small business and the self-employed. Since the majority of job growth in the US is through small business, we are letting the insurance industry basically kill our economy. Belle's business is by no means alone.

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As Bob pointed out, having kids is (or should be) the concern of every member of society. Making sure they are healthy (and helping moms get prenatal care is an important way to do that) CERTAINLY is everyone's concern

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3) Universal insurance with ALL US citizens treated as one insurance pool would be just fine with me. That way, everyone would know what it costs to be insured at whatever level they feel they need. It wouldn't depend on whether your company is huge or tiny, or you are self-employed or even unemployed. You can get insurance and it costs $X/month. Why is that impossible? How would that make it a thing that government would screw up?

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If you don't have sex, can't get pregnant, or are willing to take the risk that you won't you shouldn't be forced to subsidize those that want children.

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If you don't have sex, can't get pregnant, or are willing to take the risk that you won't you shouldn't be forced to subsidize those that want children.

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Out of interest, how do you feel about mandatory auto liability insurance?

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1) It IS everyone's concern, so the costs could reasonably be spread across all participants.

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I see no reason to punish children in poor and underinsured families by requiring them to go through risky, expensive pregnancies that will just reduce their parents' ability to care for them in the future due to cost.

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