Rx for healthcare headaches.

• Author: Wilhite, Brent
• Position: Small Business Advisor - Health insurance industry hit by higher premiums

IF YOUR ANNUAL HEALTH INSURANCE renewal was a tough pill to swallow, you're not alone. According to brokers in the insurance industry, businesses are getting hit with their steepest premiums ever. "We actually had a group get a 67 percent rate-up," says Scott Deru, past president of the Utah Association of Health Underwriters and owner of Layton-based Fringe Benefit Analysts, a health insurance brokerage firm. "It's rare not to see a double-digit increase," he notes.

And according to Deru, you can expect to see a double-digit jump again this year, on top of last year's staggering increase. "If you have a relatively healthy group, your rates should go up about 15 percent. If you're not as healthy, you may expect higher rates than that," he says.

Fortunately, these dismal rates haven't forced small business owners to pull health insurance from the pool of employee perks -- yet. But that may not be the case next year.

Several factors led us to the healthcare predicament we face today. Hospital costs and prescription drugs are contributing to spiraling health expenses. Doctors and hospitals cite the ever-growing costs of malpractice insurance. And high demand is another cause, according to insurance consultant Carl McReavy, president of Sandy-based Health Resource Network. "You have the ultimate consumer -- the patient -- who has become very spoiled, compared to employees 30 years ago who didn't have health insurance and were very thankful when they got it," he says. "Now they feel it's a right, and they're entitled to it by birth."

Much of the progress to control healthcare costs made in the mid-1990s was stalled by the supercharged economy, McReavy continues. "Young employees, particularly in the high-tech sector, that only knew the good times, demanded high-level benefits with almost no premium contributions on their part," he explains. "This forced all other employers to enhance their benefit plans to compete for employees. Small employers need to realize that this trend is over, and they are not alone in making difficult decisions to control costs."

Another dynamic working against the consumer is that doctors drive the costs, according to McReavy. He notes that Utah physicians, in particular, are making up for lost time by raising their rates disproportionately as a result of a decade of controlled increases by managed care companies. "They have no financial incentive to keep the costs down," he says. "I think the most expensive piece of...