Will rising health care costs cripple your business?

Mike Matthews was on the job one day last year when he felt a repeat of an odd feeling in his chest. The same discomfort also had taken place the day before. Now, he wondered whether it could be serious.

“I felt a little angina and considered whether something needed to be done,” he says.

As a 17-year employee of Eastern Propane and Oil in Rochester, N.H., Matthews had plenty of co-workers who would have been concerned about him, if only he had shared with them the thought that he might have a serious problem. Instead he downplayed the episode and decided to drive himself to the hospital.

“Boy, did I get yelled at later for doing that,” he says.

Matthews turned over his dispatching duties and went to get checked out. Any thought that the trip to the hospital was going to be only a minor alteration of his regular routine quickly disappeared.

“They hooked me to an EKG machine, looked at what it showed and immediately called my doctor,” Matthews says. “He comes in, takes one look at me and says ‘you’re admitted.'”

But even before the leads to the EKG machine were attached to his chest, a member of the emergency room staff had a question for him: Did he have medical coverage?

“I handed her the card,” Matthews says.

And with that, the wonderful world of medicine was fully opened for a man who knew that it was for just this type of an emergency that his employer had long since made plans. Matthews had health insurance, so it was not necessary for the hospital staff to pepper him with questions as to how he was going to pay for the care he desperately needed.

“It was a worry that I did not have to have: How am I going to pay for all this? In a situation like I was in, the last thing I needed was to add to my concerns with worries about money,” Matthews says.

Unfortunately, for many Americans, even for some who have full-time employment, the type of emotional comfort felt by Matthews during his physical discomfort, does not exist. They are among the growing number of Americans who do not have even the most basic health-care coverage.

According to the National Center for Health Statistics the percentage of persons without health insurance in early 2002 (the most recent period for which complete information is available) was 14.4 percent. That means nearly 41 million Americans are uninsured, and the NCHS says that figure is climbing.

The total number of children under 18 who lack health insurance is around 11.5 percent, or 8 million children, while the percentage of adults (18-64 years old) in that category is 17.9 percent. About 13.5 percent of all persons under 65 are covered by public health plans.

More and more employers are finding the cost of health insurance to be prohibitive. Some eliminate the benefit for new employees, some have had to cut coverage for everyone, while others make cutbacks (such as staff reductions) so that they can insure the employees who remain.

Matthews was able to see first hand what the impact can be on a person’s budget if he or she does not have coverage, for even short-term hospital stays and routine visits to the doctor.

“The costs started adding up quickly,” Matthews says. “I was in the hospital overnight, and then an ambulance was called to take me 15 miles to another hospital. I was scoped, they found blocked arteries and I was scheduled for a [quadruple] bypass procedure.

“I eventually got a look at the bill and it was more than $50,000. I don’t know what I would have done without health insurance.”

Brian Boudreau, vice president of human resources/ risk management at Eastern, says the family-owned and operated business recognizes the obligation it has to Matthews and his fellow employees.

“We want to do what we can to provide wonderful benefits to our employees, who are really much more to our owner than just employees; they are part of a family,” Boudreau says.

Eastern opened for business in 1932 by the family of Charles Clement III, the current owner. It has about 280 employees with 20 more seasonal workers added.

CHART 1: Health benefits offered.

The company provides two health insurance plans from which employees can choose. In addition to health care coverage, Eastern provides life insurance, a Section 125 Plan (child-care reimbursement), short-term disability, 401K and other benefits.

None of this is to say that Eastern has no worries about meeting the costs associated with such benefits.

“We had been with Blue Cross/Blue Shield until July, but another rate hike caused us to seriously evaluate what we could do for our employees,” Boudreau says. “The feeling was that we always provided health insurance and we would continue to do so, but we had to look around.

“We know we are a bit of a dinosaur because we didn’t require a premium payment from the employees.”

So Eastern hired a broker to help them find an affordable insurance program to adequately protect its workers. In addition to the coverage, the company came up with other ways to help employees.

Clement brought in a health/wealth program that is an optional benefit that helps employees cover their medical co-pays. The employee contributes $10 per week and the company matches that amount. After a year, if the employee has not needed to use the money, he or she receives the full amount of $1,040.

“It’s like the employee gave himself or herself a $520 raise,” Boudreau says. “We are always looking for creative ways to keep our maximum exposure limited and this was one way. The employee who stays healthy gets a benefit.”

Boudreau says the payoff for the employer in offering strong health coverage is also obvious.

“It is a competitive environment for good employees,” he says. “Providing a strong benefit package helps a company keep its workers and eliminates the need for costly training and hiring of new workers.”

CHART 2: Medical cost sharing arrangements.

The National Propane Gas Association does not track health care costs for the industry overall. In 1999 it endorsed a survey by CGI Research and Information Resources for AmeriGas that turned into a comprehensive study of what types of benefits are being offered to employees of propane companies. Out of 285 surveys sent out, 52 companies – 18 percent – responded.

All responding companies with more than 50 employees offered some type of benefit program. About 60 percent of those with fewer than 10 employees provide some benefits, and 88 percent of those with between 10 and 50 employees offer some benefits (See chart 1, page 21).

Every company that said it provided at least some benefits offered medical coverage. The second most popular offering was retirement benefits. Employee life insurance and dental coverage were third and fourth most popular. The top four coverage areas were provided by more than half of all employers.

CHART 3: Average co-insurance percentages and out-of-pocket maximums.

Most respondents offered medical coverage to full-time employees only. About 60 percent of the medical plans offered were managed-care plans. The amount of employee cost-sharing varied (See charts left and below).

The three most popular methods of cost-sharing were:

• Straight percentage for single or family coverage with an average of 31 percent.
• Higher contribution for family coverage with an average of 23 percent for single and 32 percent for family.
• Employee pays cost differential between single and family coverage.

Prescription coverage was included in all medical plans with 69 percent of respondents offering a prescription card program. The average co-pays were $8.71 for generic medications and $13.94 for brand-name drugs.

401K plans were offered by 61 percent of respondents, with a wide range of employer matches from 25 cents to the dollar, to dollar for dollar.

Thus it would appear that the good news for employees of propane gas companies is that it is an industry that is still able to pay or partially pay for the health benefits needed by its workers.

However, current trends across the nation are areas of concern. Insurance companies continue to raise rates and the rising cost of malpractice insurance has doctors raising their fees. Some physicians are even leaving states where malpractice insurance rates are too high, or leaving specialties where the doctors must pay through the nose just to be insured.

Kay Peters, who is responsible for overseeing the employee health insurance and benefits package at Oklahoma Liquefied Gas Co. in Seminole, Okla., says an increasingly unstable health insurance market is a source of concern for propane companies across the nation. OLG has 35 employees.

“I have worked in this field for 13 years, and for about the first four of those years we were able to actually add benefits for the same amount of money,” Peters says. “Now, for the last nine years, you get less for your money every new year. The costs are going up for employers perhaps as much as 25 percent annually, and every year we get less even as we pay more.”

CHART 4: Average monthly medical costs and employee contributions.

Peters says the situation has reached the point where it is imperative that lawmakers do something about the health insurance situation, and it is also imperative that the constituents of those lawmakers prod them into action.

“This has to be a group effort among all companies that want to provide health benefits for their employees but are finding it continually more difficult to do so,” Peters says.

Physicians across the country are lobbying lawmakers in state capitols and in Washington D.C. to put caps on awards granted to plaintiffs in malpractice lawsuits. Will that type of change help the health insurance situation?

“This is not just about tort reform,” Peters says. “This is about what insurance companies are asking to be paid for health insurance. It has gotten to be way too much.

“Still, the doctors are on a common ground with their patients and the employers of their patients. All are being asked to pay premiums that have gotten out of hand.”

Peters says propane company owners must contact their lawmakers and let them know about the rising costs of health insurance, and the employers must encourage the industry’s employees to also be heard by their elected officials.

“If everyone does not get together and stand up and do something about this situation, it has a real potential to ruin our economy,” Peters says.

Joe Porco, a corporate officer at Porco Energy Corp. in Marlboro, N.Y., is a propane employer who has first-hand knowledge about the importance of health insurance. His company has 25 employees.

“Three years ago I had heart surgery and the bills were astronomical,” Porco says. “We have always provided health insurance for our employees and that made me better understand the importance of having some coverage.”

But Porco also has a full understanding of how rising insurance costs can cut into a company’s ability to do as much as possible for its workers.

“We recently had to institute changes,” he says. “In the past we absorbed the cost of premium increases, but this last one was too much. We had to pass that increase on to our employees.”

Porco had to make another coverage change about a year ago when the company decided it could offer new employees only single coverage.

“If they needed a family plan, then they had to kick in for that,” he says. “We hated to do that and I still hate it. It’s just so unfair to the employee with a family.”

Porco hired a person whose task it is to find the best possible health coverage for his employees. Unless that person finds a plan that saves Porco money, there is no charge for the service.

“Companies must find creative ways to search for the lowest costs possible in health insurance plans while providing the best possible coverage,” he says.

For Mike Matthews, the dedication propane industry employers have for their workers, as exemplified at Eastern, is a huge comfort.

“At the hospital, when I handed over my insurance card, it was with the thought that my employer was behind me and really cared about me and my family,” Matthews says. “As the economy gets more difficult, more and more people won’t have that comfort. Employees should understand it is not always easy for the employer to provide those benefits, but they do because they really care. The feeling a worker gets knowing that is the best possible benefit.”