Employee RX: Insurance rates push businesses to brink.

• Author: Stokes, Jeanie
• Position: Small businesses and employee health insurance premiums - Brief Article

JOHN WRAY'S ANNUAL health-insurance premiums for his eight employees have risen to more than $40,000 from $17,000 just three years ago. The owner of Marsua's, a Sterling autoparts distributor, says finding affordable coverage is becoming more of a challenge with each passing year. "I have a tremendously dedicated workforce and I cannot leave them hanging, but I'm getting desperate," says Wray.

Another doubling of those costs would jeopardize his business. Managed care, which seeks to control costs through health maintenance organizations, "are all gone our here," he said. "I don't even have a choice."

Searching for affordable health insurance is taking more time for Colorado's small business owners, who have seen premiums rise an average 20 percent a year during the past two years. Some 67 percent have seen increases of more than 20 percent, according to the Colorado chapter of the National Federation of Independent Business. As a result, business owners are changing carriers more frequently, finding new brokers to shop their coverage, and passing costs to their employees and to customers through higher prices.

Anna Brooks, president of Brooks Electric Co. in Westminster, says the last increase for her four employees was 32 percent. "We have had to increase co-pays and transfer some of the cost to the employees. For a small company, that's pretty important," Brooks says. Her employees are now paying more than one-third of the cost of their coverage.

The reasons behind the skyrocketing costs are complex -- some related to changes in health care, others to demographic shifts, state and federal laws governing insurance and the insurance industry's own marketing strategy.

Colorado's workforce is aging, and older people require more medical care. As baby boomers age, the number of workers between 25 and 44 is expected to drop to just over 40 percent of the state's workforce by 2010, from 60 percent in 1990. As the elderly population increases, demand for medical care increases, and increased demand puts pressure on prices.

New technology and new drugs improve the outcome of health care, but there's a cost. Drug costs alone are increasing at a rate of 20 percent per year. In some rural areas, patients must drive 50 to 100 miles or more to get care, because it simply is not available in their hometowns.

Health-care providers, meanwhile, are raising charges for patients who have insurance to make up for governmental programs like Medicare and...