One of the more common complaints about insurance for small businesses, and actually for businesses of all sizes, but here we’re talking small ones, is the cost of administration. Premium billing, eligibility, enrollment, card and plan booklet issuance, underwriting and sales all add significant cost to the smaller employers’ already-pricey health insurance tab.
And that’s the main reason fewer and fewer small employers are offering health insurance, and fewer and fewer of their employees are signing up for insurance. As healthy employees decline coverage because they think they won’t need it, the sicker ones stick around, driving up claims costs and furthering the vicious circle that is today’s insurance cycle.
Costco has stepped into the fray, offering its “executive members” on the West Coast slightly cheaper health insurance through its stores. While the rates won’t make you think you’ve entered a time machine and been transported back to the sixties (or 2002, for that matter), the program does seem to be catching on. Over the last three years, membership in the big retailer’s plans has increased by 40% to 15,500 members in Nevada, California, Hawaii, Oregon and Washington.
Considering only 52% of small employers in Oregon offer health insurance to employees (and only 38% of those offer dependents and spouses coverage), Costco’s efforts won’t solve the health insurance coverage crisis any time soon. It does represent an interesting alternative, as the program reduces adminstrative expenses through automated underwriting, enrollment, and eligibility processes.
I tried out the enrollment process, and it is pretty simple and relatively quick. Rates don’t look too bad, if $541.00 per person for a company with an average age of 44 for single coverage aren’t “too bad”. (I can’t believe I just wrote that; we’re talking $6500 in annual premiums for single coverage!!)
What does this mean for you?
A smart business move by CostCo, which will be quite overmatched by macro factors making health insurance increasingly unaffordable for more and more small employers.
Fierce Healthcare gets the nod for tipping me off to the story.
May
8
UnitedHealthcare and American Express are trying something similar, where AmEx customers can get a small break on the price (~2%) if they purchase UHC through the AmEx joint venture. BUT there’s a kicker: the employer has to forego his/her pre-existing broker arrangement to get the break.
Now, I’m no fan of brokers/agent/consultants, but this is an exercise in futility.