Businesses share higher insurance costs

Health insurance

The biggest culprit is health care costs. Health expenditures nationwide in 2004 totaled about $1.8 trillion, and projections for 2014 are nearly $3.6 trillion, according to the Insurance Information Institute.

Richard Ollis, an insurance industry veteran of 21 years and fourth-generation broker with Ollis & Co., said the rapidly rising costs of health care have led to an inevitable rise in the cost of health insurance. To solve the problem, businesses are finding creative ways of financing health care, many passing costs on to employees and, ultimately, their customers.

That trend is expected to continue, as more businesses move away from the managed health care plans popular in the early 1990s toward traditional deductible plans. The result is a larger cost burden on the individual.

This comes at a time when life and health insurers profits nationwide increased 29 percent to $38.8 billion, according to Weiss Ratings Inc. In 2003, the industry saw an even bigger boon, as insurance company profits soared more than 300 percent from 2002 levels to $30 billion.

“This is the third year in a row we’ve seen group health profits increase,” said Weiss Ratings Vice President Melissa Gannon, in an analysis. “Earnings growth for this sector is driven by increasing premium rates with employers, and ultimately employees, shouldering an increasing portion of the cost.”

It should be noted that the insurance industry realized its first year of capital gains – $1.1 billion – since 2000.

Business liability

The other major problem facing the businesses is the rise in their need for liability coverage. Ollis said that an increasingly litigious culture has led to higher costs and demand for liability coverage, a fact that will be felt by more than just business owners.

“If a business has to purchase more insurance and pay increased costs, they pass that along to the consumer in increased cost of their product,” he said. “The impact is on not just insurance but also on consumer products in general.”

The end result, according to Ollis, will be an increase in the need across the country for tort reform laws like House Bill 393, passed by the Missouri Legislature in the spring. The bill included provisions limiting noneconomic damage awards in medical malpractice cases, the elimination of venue shopping and the elimination of joint and several liability.

“There’s going to be more and more pressure on the states to enact tort reform to try and get a handle on increasing legal activity,” Ollis said. Of course, not everyone agrees with that sentiment.

Springfield lawyer David Ransin told SBJ in February that he feared the tort reform bill would be “a slippery slope, and they are going to take away constitutional rights across the board.”

Ransin also cited concerns about the damage cap in the bill, saying it would end up “limiting personal responsibility for mistakes that harm other people.”