Asbury Park Press

Failing Health

Small businesses struggling with a faltering economy face more trouble affording health insurance

Asbury Park Press — Wednesday, December 24, 2008

By MICHAEL L. DIAMOND
BUSINESS WRITER

Laura Seylaz knows she is walking a tightrope by living without health insurance, but these days she believes she has little choice.

Her 3-year-old company, Rub-a-Dub Dog Wash in Toms River, is feeling the impact of the recession. The business needs every penny it can get. So health insurance will have to wait.

"I still need to be progressively growing and seeing those numbers go up," said Seylaz, 36. "We're just trying to keep our head above water."

Some small-business owners at the Shore say the slowing economy is putting health insurance further out of reach. It is forcing them to cut back on the benefits they receive, or, like Seylaz, go without insurance altogether.

The trend has prompted consumer and business groups to remind elected officials that small businesses have largely been left out of New Jersey's recent health-care reform.

Left unaddressed, that will only add to the rolls of the uninsured and underinsured.

"In these economic times, no one's revenues are expanding to keep pace with the kinds of increases they see in the cost of their health benefits," said Christine Stearns, vice president of health and legal affairs for the New Jersey Business and Industry Association, the state's biggest business lobby. "Even in good times they couldn't keep up."

Health insurance long has been a benefit considered essential to attracting quality employees, but its costs have been the bane of business owners for much of the decade. It consistently has risen faster than inflation, and New Jersey is more expensive than most.

Health-benefit costs in New Jersey increased 7.8 percent in 2008 to an average of $10,313 per employee. The state was one of four nationwide where the average cost exceeded $10,000, according to a recent study by Mercer, a human resources consulting firm.

To keep the price hikes in check, 44 percent of New Jersey employers said they planned to increase employees' share of the premiums, and 36 percent said they planned to raise employees' deductibles or copayments, the survey found.

New Jersey has higher costs, in part, because employers need to provide the benefit to attract the state's crop of highly skilled employees. Additionally, it has state-of-the-art, and thus, more expensive, hospitals; and health insurers are mandated by state law to cover any number of procedures, said Adam Speck, worldwide director for Mercer in Morristown.

Employers hoping for a break during the recession may be out of luck. If employees know their jobs are in jeopardy, they are more likely to use their benefits while they can, Speck said.

"It tends to drive cost higher," he said. "Perhaps given the nature of higher levels of cost-sharing now, it will dampen the impact on employer plans. Folks won't be as inclined to access care as readily."

Some small businesses are eliminating coverage. Forty-five percent of companies with three to nine workers offered health benefits in 2007, down from 56 percent in 1999, according to a study by The Kaiser Family Foundation.

Linda Schroeck, owner of Linda Schroeck Realty Group, an Ocean Township real estate agency, offers to pay half the cost of health insurance to cover her 14 employees. But with health insurance rising 10 percent to 15 percent a year, she said she can only afford policies that cover the bare minimum.

Now that the real-estate market has slowed, health insurance is taking up a bigger portion of her expenses and cutting even deeper into her profits.

"It's very difficult," Schroeck said. "You have to maintain the insurance, and it is so out of reach that many people in my office can't afford it."

Small-business owners say they get short shrift, in part, because they don't have the buying power that bigger companies have to negotiate lower rates.

Gov. Jon S. Corzine in July signed legislation that could make individual health insurance more affordable by allowing insurers to charge younger beneficiaries lower rates, Stearns said.

But it didn't address the concerns of business owners who offer health coverage to their employees. And Stearns said some of the proposals have unanswered questions.

For example, employers could cross state lines to buy coverage. But it isn't clear if health insurers, needing to abide by New Jersey's rules, could sell insurance any less expensively, Stearns said.

Business owners "are sort of willing to explore anything," she said.

Their plight prompted New Jersey Citizen Action, a consumer group, to announce last week a coalition of small-business owners aimed at health-care reform. They called on Congress to guarantee affordable, quality coverage without costs that could spike unexpectedly.

"Some small businesses are getting rate increases of 35 percent a year," said Crystal Snedden, an organizer for New Jersey Citizen Action. "When they finally get the increases they have to make tough decisions: Pay the fees for good coverage or risk everything by going without it?"

Seylaz in Toms River made her choice. She's gone without it, putting off doctor's visits for as long as she can. But she said she can't find adequate health insurance for less than $300 a month. And with the economy slumping, there is little money available.

"It's not another bill we can afford," Seylaz said. "Any of us."

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