How to make medical insurance more affordable

One of the things that can really throw a small operation into chaos is an accidental injury or a sudden illness. When the number of employees is few, almost everyone who works in the business is a key person. Even in countries where there is a public health service, waiting times for a consult or treatment is a real problem. This makes a health insurance plan a practical necessity for many types of business.

The ability to buy expert medical help when it is most needed can keep the business safe and well. Yet, the premiums for medical insurance have been rising faster than inflation for the last two or three years. There are a number of reasons for this. The most important are the rising fees charged by hospitals and doctors, the cost of using many of the new “high-tech” diagnostic tools, the price of medications, and so on (not forgetting that insurance companies maintain their own profits to keep their stockholders happy). As a result, many smaller businesses have been forced to cut back on their cover, often coming down to provision against the more rare but catastrophic accidents and diseases.

Cutting back on the cover or running the risk of doing without is acceptable so long as everyone is young and healthy. But you never know what tomorrow will bring. It only takes one traffic accident and a long delay before effective treatment gets the key person back to work. So small businesses are defending their interests by banding together. There are insurance groups forming within established chambers of commerce. New trade alliances and associations are being formed to approach insurance companies directly. The more businesses come together, the more powerful their buying power. If one business with twenty employees asks for a health plan, that’s small potatoes. If several hundred businesses, each with twenty employees, approach the same insurance company, they get listened to when it comes to discounts. When the association does its own negotiating, the members also avoid paying commission to agents which helps the bottom line even more.

In the small business insurance market, the insurers prefer to pick off the businesses individually. That way, there’s no effective limit on the pace of premium increases. Once businesses pool their cover, it’s the same premium rate per plan member for all within the pool and so more difficult for the insurer to push up premiums without all complaining (and, potentially, everyone moving on to another insurer). There are various legislative proposals to force insurance companies to more actively support small businesses. These include making policies more portable between insurance companies, requiring the development of more clinics and other medical resources to improve access to care and treatment outside the emergency room system, and so on. All these efforts should be supported so that business insurance costs can be brought under more transparent control.

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