Publish Date: 7/2/2005

Health insurance struggle mounts
Local employers also feel the pinch

By Christine Steele
The Daily Reporter-Herald

Local companies of all sizes are trying to manage their rising health-care costs by focusing on wellness, education, outreach and increasing deductibles, co-pays and co-insurance for their employees.

Peggy Lynch, system director for Banner Health System, which operates McKee Medical Center, said the company, which is self-insured and self-administered, spends more than $125 million annually on health-care costs for its 25,000 employees.

Lynch said Banner, like most organizations, has seen double-digit increases in health care expenses for the last several years. She said the company focuses on wellness programs and education, but still has had to raise employee costs to help offset some of the steep increases the company has seen.

Lynch said that being a health-care provider also helps keep costs down. When a Banner employee needs a particular high-cost service, like heart surgery, and they are not at a Banner facility that performs those specialized services, the company will fly the employee and family members to another Banner facility and cover all expenses.

She said a heart surgery that would cost $250,000 elsewhere, costs Banner $40,000 even with the added transportation costs.

Not all entities can enjoy those savings, however.

Mike Hart, the city of Loveland’s finance director and deputy city manager, said health-care costs are outpacing everything else in the city’s benefits fund. In October 2004 the city had to add $1.2 million to its employee benefits fund budget because the $5.9 million budgeted was not enough. Hart said the city was hoping 2003-2004 was just an unusually high year for health-care costs, and after increasing the 2005 budget for employee benefits to $7.4 million, a 25 percent increase of the original 2004 budget, it still looks as though the city will come up short. Hart said he expects the city’s employee benefit costs to top $8 million this year. Nearly $7 million of that will be for health and dental claims alone. While it is too soon to tell, Hart said the city is considering requiring employees to cover some of the cost of their health care. Presently, the city picks up the entire tab for employees. If employers are feeling the pinch, you can bet employees are, too.

Sergio Plaza, senior vice president of engineering with EagleSpan Steel Structures Inc., said his cost for full family coverage has increased $200 a month. Plaza now pays nearly $700 a month for health care coverage for him, his wife and two children.

While all employers said the cost of health care is a burden, it is one they feel they must shoulder.

Ryan Ferraro, owner and general manager of Ferraro Auto Center, said offering health insurance to his approximately 60 employees helps with employee retention. He said having a fairly young and healthy organization helps manage costs, and the company looks at the plan every year and shops around.

“We made a conscious decision to do everything we can to support our employees,” Ferraro said.

Health-care system hurts U.S. competitiveness, Fort Collins businessman says

Health care is arguably the biggest concern facing businesses today. Increasing costs put more and more pressure on companies, making it difficult for them to compete in the global economy.

Bob Thilmont is president of Mountain Global, a Fort Collins based business development company that helps small to mid-size businesses grow globally. He says the problem begins with the U.S. system of putting American companies in the business of providing insurance coverage. Thilmont spent six years running operations for Woodward Governor in Australia. He saw firsthand how the American system overburdens businesses with the responsibility of providing health care for their employees.

The U.S. is the only developed nation in the world that ties health care to employment status. A study by The Century Foundation found more than 60 percent of Americans get their health-care benefits through an employer. Besides leaving more than 40 million Americans uninsured, Thilmont said the system is also flawed in that it hurts small businesses — the so-called job generator in the American economy — and stalls economic growth.

“Small businesses cannot be expected to create jobs if for every new employee they hire they have to spend an additional $5,000 to $8,000 per year for health care coverage,” he said.

If the government doesn’t remove this cost from the U.S. business model, he said, it will increase the trend of sending American jobs overseas.

While there is no perfect solution, a universal health care system in which the federal government provides every citizen with catastrophic coverage would relieve businesses of the responsibility of being health insurance providers, he said.

Thilmont said the Australian system is a blend of public and private health care coverage. Every Australian has access to universal health care through a government program and can buy supplemental coverage from private insurers for a fraction of the cost of private insurance in the U.S. Thilmont said the result is a semi-private health care system that is more affordable to the average Australian.

Thilmont said standardizing administration would also help keep costs down. The U.S. government does it in other industries, he said, such as banking, and oil and gas, but not health care. Having many health care providers with a variety of systems drives administrative costs up requiring more time and money be spent on administrative costs. Sixty-two percent of medical costs are in administration, not in delivery of services, Thilmont said. Having one system of paperwork would streamline efficiency and cut costs.

Thilmont said the federal government underwrites mortgages and flood insurance, why not health insurance.

The government must also work to provide malpractice insurance relief and tort reform in the health care system, he said.

Having a completely profit-driven system, like the U.S. model, is about keeping costs down not about providing care.

A single-payer system, with the government not providing care, would be good for business and help the U.S. compete in the global economy, Thilmont said.