Small companies see highest hikes in health insurance costs

Some businesses are reporting that their premiums are going up more than 20%.

By Victoria Stagg Elliott — Posted June 25, 2010

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Health insurance premiums have long been experiencing growth that outpaces inflation, but a survey released June 2 suggests that companies with fewer than 50 employees are the hardest hit.

The Council of Insurance Agents & Brokers surveyed 108 members. Approximately 86% noted a growth in rates among small businesses since November 2009, with 18% of that group recording increases of 20% or more. Another 24% had rate increases between 16% and 20%.

Mid-size companies also were hard hit. Nine percent reported rate hikes of more than 20%. An additional 24% had premiums grow between 16% and 20%.

"Several members commented that they are seeing large increases," said Ken A. Crerar, the council's president. "Brokers have some uncertainty about business going forward, but most believe there will be new demand for their services."

Small- and medium-sized businesses have long complained that they are taking the biggest hit from health insurance premium increases. Several small business representatives, for example, showed up at WellPoint's annual meeting to ask why their rates were going up by as much as 40%. Health insurers say the underlying costs of care are responsible for the rise in premiums. The Consumer Price Index increased 2.2% from May 2009 until April, according to data released May 19 by the Bureau of Labor Statistics.

About half of states regulate health insurance premiums in some way, and dollars allocated by health system reform are becoming available to help establish systems to oversee and regulate premium increases.

All states and the District of Columbia now can apply for the first round of Dept. of Health and Human Services grants, according to a statement issued June 7 by the agency. A total of $51 million is available for fiscal year 2010, out of the $250 million that will be released over the next five years.

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