Since I previously posted regarding the topic of health insurance and small businesses, I’ve gone through the process of getting quotes for a group plan for MWI. We discontinued our plan last year. My hope was that when we signed up again our rates would be lower because some of the employees who had made the premiums so high in the first place had left, but such is not the case.
To provide basic health insurance to MWI’s employees would, on average, cost MWI $616 per month, per employee. That means if we have 10 employees we’re paying out $6,160 per month, or $12,320 if we have 20 employees. That’s a decent amount of money per month for a small business. But what is really interesting is that the same plan that costs an individual $270 per month if he were to get his own personal insurance plan costs MWI almost $1,000.
Now the two plans aren’t completely identical. The personal plan doesn’t really have maternity coverage, although apparently you can pay another $100/month and get maternity coverage. I’m not an expert on that. Generally the difference in the cost of a plan is the deductible, or the amount the individual pays before the insurance kicks in and covers things. But other than for the deductible, the plans are identical and are through the same company.
The real reason why the group plan is so much more expensive is because when a company signs up for a group plan, the health insurance company is required to insure any employee that is hired on, no matter their physical condition. I could hire a skydiving diabetic leper with brain cancer, clogged arteries, a 10-pack a day smoking habit, who is actually going through a heart attack at the moment he fills out the insurance questionairre, and the health insurance company would still have to insure him because he’s signed up under the group plan. Or at least that’s how I understand it.
However, if he were applying for a personal plan the health insurance company would just reject him as being uninsurable.
For the health insurance company it’s all about risk. They’re taking the risk when they create a group plan that the employer is not going to employ people who need lots of healthcare. That way the health insurance company wins. If a company’s employees all get sick or hurt and needs hundreds of thousands of dollars of care then the health insurance company loses. The fact that they are required to insure whoever the company hires puts them at great risk, because they have no control over who gets hired.
The only control they have is that they are allowed to raise premiums up to 85% per year. So if a company hires someone who is really messed up, married, capable of getting pregnant, etc., they can expect their premiums to go up a lot the next year.
This expense is why small firms are clamoring, or at a minimum politely requesting, that they be able to buy into the state of Utah’s health insurance program, aka PEHP. If it is ever enacted and works as planned, it would enable small firms with 2 to 50 employees to join the state plan and then premiums would be closer to $300 instead of $1,000.
But who’s against it? Health insurance companies, of course. Why? Why do you think?