HispanicBusiness

A new study says insurance premiums will rise during the next few years, squeezing profits and swelling the ranks of the uninsured.

By Derek Reveron
Hispanic Business® magazine, April 2002

Small Hispanic-owned businesses and their employees are among those who will be hardest hit by rising healthcare costs this year, according to industry analysts and CEOs. HispanTelligence projections indicate that Hispanics own about 1.4 million businesses in the United States, but most of these businesses fall into the categories most vulnerable to health cost increases – sole proprietorships and firms that employ fewer than five people. “Hispanics made an aggressive entry into the world of running small businesses in the last 10 years, and rising [health insurance] premiums could put some of them out of business,” warns Miguel A. Fuentes, president and CEO of Bronx-Lebanon Hospital in New York. A recent study by the National Coalition on Health Care (NCHC) predicts that premiums will increase 20 percent or more for many small businesses this year, and some will be forced to drop coverage altogether. The study concludes that a confluence of trends – recession, rising unemployment, increases in premiums, and the aftermath of the terrorist attacks – is brewing a “perfect storm” that will increase the number of people in the United States who lack health coverage from 39 million in 2000 to 45 million by the end of 2002. Hispanics could suffer disproportionately in these economic crosswinds. A report by the Pew Hispanic Center, an affiliate of the Pew Charitable Trusts, predicts that high jobless rates will force Hispanics to lag behind in the expected economic recovery. Unemployment for Hispanics hovers near 8 percent, compared to about 5 percent for non-Hispanic whites. Since most people receive health coverage through their employment, the jobless become uninsured because they can’t find work or because their new jobs provide unaffordable insurance or none at all. Every day, Mr. Fuentes at Bronx-Lebanon Hospital sees the result of layoffs and cutbacks in companies’ healthcare coverage. “Many jobless people show up in our emergency rooms with no insurance, but we have to treat them,” he says. “The state reimburses 40 cents on the dollar, so we have to be very creative at containing costs and maximizing revenue.” On average, employers’ health insurance costs will rise 34 percent between 2000 and 2002, according to the NCHC study. Many employers will pass along all or part of the increase to employees, some of whom will drop coverage because they can’t bear the marginal cost. In addition, the health industry will face pressure to pull back on servicing small businesses and their employees. “The smaller the company, the less desirable it is to a carrier,” says Evarist Milian, president of Insurance Marketers Inc., ranked number 194 on the HISPANIC BUSINESS 500. “I know some small employers that paid 60 percent of the premium two years ago, but it’s 40 percent now. A lot of manufacturing companies have borderline minimum-wage people who can’t afford the increase.” To concentrate on their most profitable business, insurance companies have cut their commissions to agents and brokers, the traditional channel for small-business policies. Mr. Milian reports that Aetna’s commissions to his company have dropped from 6 percent to 3 percent over the last three years. United Healthcare has revamped its fee structure for businesses with fewer than 25 employees, effectively reducing the payment for such accounts. “Insurance firms are basically giving us disincentives to write small groups,” Mr. Milian says. “Small companies are coming to us asking us to find cheaper health plans, but the choices are extremely limited.”