David Hurley, owner of Landmark Engineering and Surveying in Tampa, had to offer higher deductible coverage with less generous benefits. [Photo: Michael Heape]

Healthcare Costs Some results of the Kaiser Family Foundation's 2011 survey about employer-sponsored health insurance: • Average annual premium: $5,429 for employee, up 8% from 2010; $15,073 for family, up 9% from 2010 and 113% from 2001 • Average share paid by employees: 18% for themselves, 28% for family coverage. Workers in small firms on average contribute less for themselves but more for their families (small for Kaiser is up to 199 employees, significantly larger than Florida small businesses) • 48% of companies with three to nine employees offer health benefits. Benefits Trends Insurance agents and benefit consultants report: • Employers are making a defined contribution toward healthcare insurance and leaving it to employees to pick their plan based on what they want to spend. • Wellness continues to be an emphasis as do higher payroll deductions for smokers and discussion of higher payroll deductions for those with a high body mass index or high blood pressure. Consulting firm Towers Watson, in a national survey, found a rising number of companies charging employees more for coverage if they smoke, are obese or have high cholesterol.

Small businesses are accustomed to a shock at healthcare insurance renewal time, so the 2% to 3% increase David Hurley saw for his Tampa engineering firm in 2011 would seem moderate. But that's only on the surface. To avoid premium increases of 33% and 40% on the two plans his company offers workers, he opted for higher deductibles and less generous benefits. There's no comparison, he says. "It's apples and oranges, or we actually got a persimmon — something sour," says Hurley, owner of Landmark Engineering and Surveying.

Florida insurance agents say the premium increases their customers are seeing vary from low single digits to double digits, but a 2011 Kaiser Family Foundation annual national survey found an 8% increase in premiums for employee coverage. In Florida, the size of premium increases has much to do with geography, the age of a small business's workforce and its claims history. "One or two people can make a difference in a small group," says Robert Pariseau, president of benefits company AGIS Tampa Bay. Small businesses generally see their workforce age as they retain core employees through the years, driving up premium costs. Hurley employs 26, down from 89 in 2005, and covers $302 of the per employee monthly premiums of $335 and $373, depending on the plan.

Small businesses have restrained cost increases by adopting high-deductible plans. Nationally, Kaiser reports high-deductible plans covered 23% of small-business employees in 2011. While high-deductible plans can hit employee pockets, it can make them better consumers by, for example, motivating them to ferret out lower-cost providers of services like MRIs. "We're starting to see that have a positive impact," says Julian E. Lago, who heads the employee benefits division at Plastridge Insurance Agency based in Palm Beach Gardens and a former president of the Florida Association of Health Underwriters. Wider use of generics also has helped control costs.

Shifting costs to employees remains a trend, but it can also lead workers to drop coverage, which sets off its own negative loop as insurers don't get the number of employees for which they contracted.

Offering Health Benefits Company size 1999 2011 3-9 workers 55% 48% 10-24 74 71 25-49 88 85 All small firms (3-199) 65 59 Large firms (200+) 99 99 Source: Kaiser Family Foundation

Some businesses have reacted to rising premiums by cutting employees to seasonal or part-time hours to keep from having to insure them. "The economy in general has caused employers to look at every expense," Lago says. Some have dropped coverage altogether.

Alan Sayler, owner of Sayler's Suncoast Water in Pinellas Park, a water conditioning company for homes and businesses, looked at dropping group coverage after a 33% increase in 2011 brought his per employee premium to $436 a month (of which he pays $296). If "any other vendor increased their costs like that, you would be yelling and screaming," Sayler says. Having recovered from prostate cancer in 2000, Sayler had trouble finding an individual policy for himself; one of his employees with a pre-existing condition would have had an individual policy premium that was "outrageously expensive." So Sayler elected to keep group coverage for himself and his two full-time employees. A particular object of Sayler's ire is what he sees as Washington's intrusion in the marketplace and specifically the healthcare bill Congress passed in 2010.

"There's a lot of uncertainty until the Supreme Court rules on the healthcare reform law," says Ken Stevenson, legislative chair for the Florida Association of Health Underwriters who's with the Earl Bacon agency in Tallahassee.

The new healthcare law includes a tax credit for small-business owners, but it has proved difficult to obtain. Says Lago, "It's not easy to do that, but there's a nice benefit if you can." Hurley's firm didn't qualify — not enough lower-paid workers.

Hurley doesn't like to think of a repeat in 2012 of higher deductibles, lesser benefits and premium increases. "If that continues this year, it's not a pretty situation."

The Case for a Plan B Before the healthcare overhaul, Florida conceived its own initiative to create a small-business healthcare insurance marketplace. The state expects to roll out Florida Health Choices this year. Employers with fewer than 51 employees will be able to shop by web portal for plans in their county.But the marketplace won't meet the new federal mandate that each state create an exchange meeting federal approval by Jan. 1 or face having the federal government run one for it. Befitting Florida's leading role in having the overhaul declared unconstitutional, the Legislature last year didn't bring out legislation to create an exchange consistent with the federal law's requirements. Some in the industry want it to do so. Rather than have the federal government impose one, "let's put a plan B together just in case," says Ken Stevenson, legislative chair for the Florida Association of Health Underwriters who's with the Earl Bacon agency in Tallahassee.