The cost of doing healthy business in Idaho [The Idaho Statesman, Boise]

Feb. 22--When the state Department of Labor asked about 1,500 employers what benefits they offered in 2009, it found the recession pushing health insurance coverage for full-time workers even closer to extinction. Job-based medical benefits had been falling away since the 2001 recession, when more than 80 percent of employers offered health plans to their full-timers. By 2009, that had dropped to 56 percent.

There was a turnaround last year. The department's latest survey, covering 900 employers, found 66 percent offering full-time workers the option to buy health insurance and paying an average 84 percent of the premiums. About 80 percent of their workers are enrolled.

But fast-rising health care costs remain a burden to companies. Interviews with small, mid-sized and large Idaho employers show that some are hanging on to health benefits by negotiating rates, asking workers to pay a bigger share of the costs, switching to different insurers or becoming their own insurers.

The U.S. Department of Health and Human Services says the average annual family premium for small-business employees more than doubled in a decade, going from $5,700 in 1999 to $12,700 in 2009.

Here's how four Treasure Valley businesses are coping with rising health-insurance costs.

AT CONCRETE CONSTRUCTION SUPPLY, BUSINESS IS GOOD. BENEFITS, NOT SO MUCH.

Last year was the best in the past three or four for Concrete Construction Supply in Meridian. Sales were up 25 percent over 2010 -- 36 percent just in the Treasure Valley -- and owner Ken Fernandez predicts an 18 percent gain company-wide this year.

The company had between 15 and 30 employees going into the winter, and its hiring has picked up as sales have risen. The company added a few new hires last year.

Unfortunately, health insurance costs have gone up, too.

The company uses the Associated General Contractors plan provided by Blue Cross of Idaho. Blue Cross raised the base rate for that plan -- it covers 6,079 Idahoans -- by about 13 percent this year. Its main justifications were rising medical costs and more claims from members.

Concrete Construction Supply's premiums went up 27 percent. The company tried to mitigate the damage by raising the employee deductible from $1,500 to $2,500, "which only equated to a 14 percent increase," says Shelby Rayl, the company's office manager and purchaser. "But, of course, we have a worse plan."

Fernandez started the business in 1986 and first offered insurance to employees in the mid-1990s. The company paid 100 percent of the premiums for employees and their family members.

"Somewhere around 2000, I remember specifically getting a quote on health insurance that year, and coverage [price] jumped 50 percent," Fernandez says. "That's the point in time I said, 'I've got to look at making some changes.' "

Since then, the company has stopped offering dental coverage and insurance for family members, raised deductibles and gone 50-50 with employees on premiums. The changes have made a measurable impact on costs:

-- When its plan covered families, the company spent an amount equal to 1.12 percent of sales on health insurance.

-- When families were dropped, that fell to 0.8 percent. "If I kept covering the families, it would have gone up to 1.5 to 2 percent," says Fernandez.

-- After dropping dental and splitting health premiums with employees, the cost is now 0.35 percent of sales.

The company had to cut those costs to stay alive, Fernandez says. The recession battered the construction industry, he notes: "We barely made it out of this thing."

He doesn't plan to make any additions or further cuts to benefits at this point.

"For the most part, people that are still with us and still have the insurance understand," he says. "And I tell you what, I didn't have anybody quit because I cut their insurance benefits. They weren't happy ... but they still had a job."

He says a few workers are dropping their coverage now -- especially the younger ones.

Rayl hopes a forthcoming health insurance exchange will "give everybody more bargaining power."

AUTOMATED OFFICE SYSTEMS: BENEFITS AT RISK

Dr. Edward Savala runs the Clinica Santa Maria in Caldwell, a small private practice where he treats low-income and immigrant patients.

"I basically take care of individuals who can't afford insurance," says Savala, whose wife also works in the clinic.

Even though he's a doctor, he -- and his wife -- have "catastrophic" insurance plans. The plans kick in only after a high deductible is met, usually in the thousands of dollars.

Catastrophic plans are a staple for young and healthy people who, for example, don't want to go bankrupt after a car accident, but can't afford a plan that pays for brand-name prescription drugs.

Savala, 63, who lives in Caldwell, says he doesn't consider himself to have health insurance at all. "What good is [it] if you've got a $2,000 to $5,000 deductible?" he says. "It's almost cheaper to pay out of pocket than to have insurance" and pay premiums and copays before hitting the deductible.

Savala had a health plan through "one of the big insurers." He scrapped it when the company raised his premium by more than half.

"I never use your insurance, and I've had it for more than 10 years," Savala says he told the insurer.

Insurers may raise premiums for even the healthiest person. One oft-cited justification is that claims and costs rise across the whole segment of health plans.

Savala takes issue with that, saying, "There's no differentiating between Mr. Garcia or Mr. Savala or Mrs. Smith."

He says the rising cost of health insurance is a byproduct of medical industry over-inflation.

"It's just ridiculous what you have to pay for health insurance, when the majority of patients' visits are going to be to a general practitioner," not a higher-priced specialist, he says.

Health insurance costs for Automated Office Solutions went up more than 25 percent a year for the past four years, says co-owner Dave Silva.

The business equipment and supply company in Boise has 15 to 18 employees who qualify for benefits.

Those employees split the cost of health coverage with the company, and Silva says the company's share is about $1,500 a month.

The company's contract with its health insurer is up in March.

Even though the company plans to hire two more people, its benefits are in danger.

"If [rates] go up 25 or 30 percent, I have to make a decision whether I want to [offer insurance] anymore," Silva says. "It's a tough, tough thing."

Silva says history tells him that's a choice he'll have to make this year -- and that a well-placed phone call might make all the difference.

"One year, we got hit with a 28 percent [rate increase]," Silva says. He called a friend who had insurance industry connections.

The company "called back an hour later and made [the increase] 6 percent," he says. "It shows you what they can do."

Looking ahead, Silva says the company's accountant is checking into health insurance tax credits for small employers.

"I love to take care of my employees. All my life, I've been taken care of by [employers] like IBM," he says. "Now, I don't know. I don't know if I can keep doing that. ... But I want to."

NORCO: A STORY OF NEGOTIATIONS, MANAGING WORKER PERCEPTION -- AND WORRYING ABOUT 2014

Jim Kissler, owner of Norco Inc. in Boise, sees health insurance costs from two sides: as an employer and a participant in the industry.

Norco has fingers in several industries, but one of its fastest-growing areas is medical, including portable oxygen supply and machines that help the most serious snorers sleep.

Kissler offers health insurance to his 900 employees. After rates shot up double-digits every year under Norco's previous insurer, the company went to a self-funded model. It sets its own rates and pays out claims as a health insurer would, using an insurance company as administrator.

The coverage costs Norco "millions of dollars," says Kevin Chase, chief financial officer. "So we want them to get value and perceive that value."

For a company that spans seven states, the trickiest part of picking a health plan is finding one that works as well in rural Wyoming as it does in urban Boise, Kissler says.

A decade ago, Norco offered workers free health insurance. Now workers chip in 20 percent, or about $76, per month for a midrange individual plan.

About 800 workers are insured through Norco, which requires its staff to have insurance coverage. The others get coverage elsewhere, such as through spouses' plans.

Kissler -- and other employers interviewed -- declined to name the company's insurer of choice. (Most of the unnamed insurers in these four stories are among the largest in Idaho.)

After bidding for insurance every year, Norco took a different approach for 2012. The company took its self-funded plan to an insurer that "we're going to stay with for the next three years," Kissler says.

Why? "They made us an offer and sweetened the offer," he says.

Chase says, "They came back with a deal and said, 'We can give you a rate for [2012], and the increases [for three years] will not exceed a certain number.' " The insurer also guaranteed that Norco's claims costs would drop, thanks to a larger network of health providers.

Kissler is concerned about what will happen to medical care -- and to Norco's medical business -- when the Affordable Care Act's universal-coverage mandate begins in 2014. He worries that a crush of new people with new private insurance or Medicaid coverage will overwhelm the system.

He wonders how he'll meet demand from "an additional hundred thousand people in Boise" while reimbursements are static or falling. "Do I still run my trucks to McCall?" Kissler says. "I [am] getting reimbursed $50 where I used to get $75."

CLINICA SANTA MARIA: A DOCTOR WITH BAREBONES COVERAGE

Dr. Edward Savala runs the Clinica Santa Maria in Caldwell, a small private practice where he treats low-income and immigrant patients. "I basically take care of individuals who can't afford insurance,"?says Savala, whose wife also works in the clinic.

Even though he's a doctor, he -- and his wife -- have "catastrophic" insurance plans. The plans kick in only after a high deductible is met, usually in the thousands of dollars.

Catastrophic plans are a staple for young and healthy people who, for example, don't want to go bankrupt after a car accident, but can't afford a plan that pays for brand-name prescription drugs.

Savala, 63, who lives in Caldwell, says he doesn't consider himself to have health insurance at all. "What good is [it] if you've got a $2,000 to $5,000 deductible?" he says. "It's almost cheaper to pay out of pocket than to have insurance" and pay premiums and copays before hitting the deductible.

Savala had a health plan through "one of the big insurers."?He scrapped it when the company raised his premium by more than half. "I never use your insurance, and I've had it for more than 10 years,"?Savala says he told the insurer.

Insurers may raise premiums for even the healthiest person. One oft-cited justification is that claims and costs rise across the whole segment of health plans.

Savala takes issue with that, saying, "There's no differentiating between Mr. Garcia or Mr. Savala or Mrs. Smith."

He says the rising cost of health insurance is a byproduct of medical industry over-inflation.

"It's just ridiculous what you have to pay for health insurance, when the majority of patients' visits are going to be to a general practitioner," not a higher-priced specialist, he says.

Audrey Dutton: 377-6448

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(c)2012 The Idaho Statesman (Boise, Idaho)

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