Small Business Owners Struggle with Record-High Health Insurance Costs

"Good afternoon, Madam Chair, members of the committee. For the record, my name is Jill Shaffer Hammond and I represent Hillsborough District 3, Peterborough…"

Representative Jill Hammond is a self-employed graphic designer.
In recent years, it became more and more difficult for the Peterborough Democrat to make ends meet.

Her health insurance costs were soaring.

"The last time I was in the small group market I had the lowest rate I could get and my deductible was $5000, which, if I had ever had to pay that much might have bankrupted me."

Luckily for Hammond, voters elected her to the New Hampshire House in 2006.

The pay may be notoriously low – but the state employee health plan is rich in benefits.

"As a state rep being able to buy into the state employees plan was -- Woah, this is a godsend! Now I could go and get my annual physicals and all that kind of stuff, and I wasn’t going to have to worry about an incredible amount of more out of pocket expense."

But most small business owners don’t get elected to the legislature.

So Hammond has proposed a bill that would allow companies with up to 50 employees to buy into the same plan she enjoys.

Premiums would range from $534 a month for an individual to almost nineteen hundred for a family – hardly cheap. But it’s better than many small businesses are currently able to get.

Hammond’s bill faces a tough road ahead, but it highlights the crisis that New Hampshire’s business community faces.

The majority of New Hampshire businesses have fewer than 20 employees. And they pay among the highest health insurance premiums in the nation. That’s according to America’s Health Insurance Plans, an insurance company trade group.

AHIP says that companies in this state with 11 to 25 employees pay the third highest health insurance premiums in the country.

Sole proprietor businesses pay the nation’s fifth highest premiums.

"Embroidery machine…When we’re working on leather, we run the machine really slow. Normally, these machines would be running a lot faster."

Mary Hewitt is 49. She runs Time 4 Change Embroidery in Concord. Business is good. And that’s fortunate. Hewitt’s just learned that her Anthem Blue Cross copays have doubled.

"Basically I just had a talk with my physical therapist today to say I can’t afford $80 a week."

That’s $80 a week on top of her premium, which is also going up -- to almost $700 a month.

Hewitt will work longer hours to pay for the rate increase.

"The alternative is not a pretty picture. Do you want to risk losing everything you’ve built by not having the health insurance or do you just work extra hours to try to make up the difference every month?"

People disagree about why New Hampshire’s costs are so high. For one thing, small businesses don’t have much negotiating power. But Beth Roberts, a vice president at Harvard Pilgrim Health Care, argues that there’s another reason.

Now, this gets tricky. New Hampshire allows sole proprietors to buy insurance in the individual market OR in the small group market. In the individual market, insurers look at your health and decide to insure you or not.

"If somebody’s young and healthy, they get a very aggressive rate from the individual market."

But what if the shoe store owner has high blood pressure? Insurers could charge him a very high price.

So instead of buying insurance in the individual market, he goes to the small group market, where he can’t be turned down. That works for him, but Roberts says it’s bad for other small businesses. In insurance lingo, this is called adverse selection. The term means that older, sicker people wind up in one group, and younger, healthier people end up somewhere else.

Roberts argues that the only self-employed people who buy insurance in the small group market are those older, sicker people. And that raises the small group’s rates.

"The other employers who are purchasing through that market are paying for that adverse selection."

Most states don’t allow self-employed people into the small group market.

Right now, there’s no good answer for the small business owner.

Some, however, are eagerly awaiting Health First, a plan initially proposed by Governor Lynch. Health First is designed to keep premiums to an average of $325 a month. And it will fully cover several different kinds of preventive care, including physicals.

That plan should be available in October. It sounds great. But its deductibles can range from twenty-five hundred to eight thousand dollars. And it comes with strings attached. Healthy people or those who lose weight, quit smoking, or manage chronic illnesses will get discounts – and even cash payments.

But people who just can’t kick their beer and pizza habits? They may still find themselves working longer hours just to pay their health insurance bills.