After writing a few weeks ago that there are differences of opinion on potential cost savings associated with preventative medicine, I received some comments that I must be against health care reform. Nothing could be further from the truth. I’ve been an advocate of health care reform since the ’90s when I first became interested in politics and social issues.
As those who know me would expect, I have several opinions on health care reform. Too many to put in one post. So for this post, I’d like to provide a little background perspective. I have been exposed to the user side of health care from a few different perspectives.
A Broke Musician
In the late ’80s and early ’90s I was a full-time musician making very little money. My parents were going through their own financial problems. My dad had lost everything in the crash of ’87. My mom had mismanaged her money badly, and was close to losing the farm. Literally. Upon realizing that if anything happened to me it would become a financial burden on them, I went out and got health insurance and life insurance. I certainly didn’t have any spare money at that point in my life, but my parents had been through enough, and I had no intention of adding to their problems because I had been too irresponsible to pay for my own insurance.
A Young Entrepreneur
In ’93 I became business partners with Billy Pilgrim. He had started a small graphic design business called PilgrimPage. I thought I could help. Much like our days in music, we were making very little money. But we were used to that. During the first couple of years, the company paid for our health insurance, and not much else. I was working nights running sound for bands at local bars for money to live on.
To the Booth
As PilgrimPage continued to struggle financially, and I continued to struggle financially, I took a job as a tollbooth collector for the Kansas Turnpike Authority in ’96, basically working nights and weekends so that I could continue to work at PilgrimPage during the days. The turnpike provides great health insurance, and I was able to drop my personal policy. The coverage covered me and my family. Very nice.
PilgrimPage Takes Off
Or so it seemed at the time. After years of struggling, PilgrimPage was finally developing a nice client base. By 2000 it really seemed we were in position to take off. I cut my hours at the turnpike to part-time, which means I lost my “free” health insurance. My wife was pregnant (a pre-existing condition) so I had no choice but to continue my turnpike health care insurance through COBRA at a cost of about $650 per month. Yikes.
The Recession of 2001
As quickly as PilgrimPage began taking off in the late ’90s, it began slumping in 2001. We were hitting the recession, and our biggest clients were all packing it in. Money was tight, and I was regretting leaving my full-time position at the turnpike. During this time we launched our promotional products website Absorbent, Ink., and it was really Absorbent, Ink. that provided our financial salvation. And my next exposure to the problems with health care.
A Growing Business
Throughout this decade, Absorbent, Ink. achieved amazing growth. In 2003 we had a staff of five. By 2008 we had a staff of 45. Having witnessed what a lack of health coverage can do to a person or family, Billy and I had always wanted to offer health insurance for our staff. But it’s really expensive. When we were finally able to afford a group policy, I think we were more excited than the staff.
Exposure to health insurance from the business side was definitely a new experience. I had seen increasing premiums as a consumer, but these increases are really magnified when you’re a small business owner. We were seeing yearly increases in premiums from 15-25%. And quickly we were exposed to flaws in the system. Here are just a couple of them:
1. In Kansas, when you have a group health coverage policy, you must offer the policy to every employee who averages 30 or more hours per week. And the employer must pay at least 50% of the coverage. This is fine, but what about those who work less than 30? We had a number of employees who worked only 20 hours per week. Why could we not offer our coverage to these employees if they were willing to pay 100% of the coverage? Don’t ask me.
2. As a small business, your premiums are dictated by the profile of your staff. Early on our staff was very young. Younger males are the cheapest to insure. And having young males on your staff keep your insurance premiums down. As Absorbent, Ink. grew and we were able to afford to pay higher salaries, we were able to attract a more experienced (older) staff. With this comes a change in our profile, and increases in premiums. If you have 20 people in your profile, and you shift your profile by replacing three male employees in their 20s with three employees who are 20-30 years older, the rates for the entire group increase significantly.
Fixing Health Care
These are only two of the many problems that need to be addressed in health care reform. Businesses should be allowed to offer premiums to part-time employees. And small businesses need to be able to pool together to get better rates and better protection to changing premiums. Hopefully over the next few weeks I’ll find the time to write a bit more.