Small biz: Rising premiums = less growth
Where's stiff competition when you need it? Citigroup last week release a nationwide survey of 30 insurance brokers showing that more insurers are raising premiums at a faster rate than those who reported slowing increases. In recent third-quarter earnings reports, insurers such as WellPoint Inc., UnitedHealth Inc. and Humana Inc. all reported less aggressive pricing by competitors in a number of markets, making it easier to charge premiums that would assure a solid profit, according to a story in today's Wall Street Journal. Some premium increases being quoted to employers are double those quoted just a few months ago.
Check out this example in the story of a St. Petersburg business facing steeper premium increases just as the economy is weakening further and credit is harder to come by. "We can't pass these costs on to our customers; the market just won't bear it," Daniel Lance, who owns E.CAB in St. Petersburg, told the Journal. The firm that produces finishes and fixtures for elevator-cab interiors.
After no increase last year, the story says E.CAB's premiums jumped 75 percent to about $6,800 a month when its annual Blue Cross Blue Shield of Florida policy came up for renewal this month. Much of the jump was triggered by the hiring of a few older workers by the 25-employee firm, pushing it into a higher-cost actuarial bracket. E.CAB couldn't get a better price from rival insurers.
Rather than pass the cost on to his employees, who aren't required to contribute premiums for themselves though they do for family members, Lance said he's forgoing new wood-cutting equipment he had planned to purchase. "I just felt it was a bad time [to pass on costs]," he said. "The employees are having a tough enough time, too."
As for the insurers, they argue they need to grab price increases when they can. "Generally speaking, we've been increasing our pricing over the last several months and last several quarters with the thought in mind that it's going to be a lot more conservative in terms of the pricing environment and we're beginning to see that," said James Murray, Humana's chief operating officer, in its earnings conference call (read the transcript) with analysts late last month.
As if small businesses (and their employees) are not dealing with enough cost pressures already...
-- Robert Trigaux, Times Business Columnist