During the second half of 2010, business and health insurance overheads will factor more heavily into the cost of doing business, with unfolding healthcare reform leaning on an already unsteady situation.
“The continued slow in the economy has everyone looking year-over-year at the budget and what they can afford to spend, but they still need to be covered,” said Colleen Tighe, lead insurance agent for State Farm Insurance in Bridgeport.
Tighe said in many small businesses it is more likely that claims will come against a business in this climate.
Tighe said in hard times employees are looking more than ever to take advantage of employer insurance. “You need to be adequately covered, especially now,” said Tighe. “People are looking to find angles.”
Brian Rogers, president of Stamford Insurance Group, said business owners are budgeting their insurance policies for 2011 with the same concerns of the past, though those concerns are more fundamental.
“They need to look at ways to save costs and maintain coverage,” said Rogers, whose company handles commercial and employee benefit insurance. “It”™s another year of uncertainty in regards to benefits.”
Rogers said it”™s difficult to tell how insurance carriers are going to react to the healthcare reform law as it comes into play.
In the implementation of 2011 Healthcare Reform, Medicare will provide free annual wellness visits and personalized prevention plans, required to cover preventive services with no co-pay and additional discounts on drugs. There is also part of the plan that will provide small businesses with a way to offer tax-free benefits; though many are wondering where the redirected cost of the initial savings will land.
“I think you can expect a significant rate increase,” Rogers said. “Business should be vigilant and look at solution of cost sharing and benefit design.”
Rogers said high co-pays and deductibles, and health savings accounts are continuing in popularity.
“Employers really have their backs against the wall,” Rogers said. “There”™s a trickle down going on, and the employers walk the tight rope every year as to how to provide the best benefits to attract and retain employees, and still do business.”
Rogers said health insurance costs are relevant to every business, large and small.
“A technique that is becoming popular in workers compensation insurance is instead of making an estimate they are paying during the course of the year as a voluntary employee benefit,” said Rogers. “That applies mostly to manual work environments with high-turnover, like restaurants or contractors.”
According to the Department of Labor, the average cost for health insurance benefits was $2.08 per hour worked in private industry, or 7.5 percent of total compensation, in March of this year. In March 2000, employer costs for health benefits averaged $1.09, or 5.5 percent of total compensation. The Department of Labor reported total compensation costs for private industry workers increased 1.5 percent in the New York-Newark-Bridgeport metropolitan areas for the year ending in June.
Rogers said employee benefit communication has become key to effectively dealing with the rising insurance costs in any type of business.
“It”™s the education, to get the most out of the benefit package, that allows the employees to have greater satisfaction and understanding of what they”™re getting,” Rogers said. “Employers are looked on favorably for that.”
Tighe, whose clients are typically small-to-mid size retail businesses, said just as many landlords are keeping rents high for store-front businesses, they are also continuing to demand higher limits on liability coverage for their tenants.
“We have to try to keep the budgets down for them,” said Tighe. “Businesses should be looking to customize packages to help drop the price.”
Tighe said realizing the details of a business are often where cost savings can be found.
“The inventory coverage for a Carvel may not need to be the same as a liquor store,” said Tighe. “When we work out where can be skimped it can actually be surprising how cost effective and low we can keep the rate. Particularly for the small businesses it can be great to be able to pull apart the package.”
Rogers said commercial insurance continues to have a trend of stable rates.
“The competition is great, so there”™s still opportunity to drive down costs by looking at alternate insurance companies,” said Rogers. “There haven”™t been great losses, companies are scrambling to take on market share and there continues to be a price war. You really need to look at your account and make sure your carrier is providing you cost effective coverage.”
