Higher Insurance Costs In 2009

A nationwide survey of 30 insurance brokers recently released by Citigroup, said more insurers are raising premiums at a faster rate than those reporting slowing in-creases. And the increases, set to begin in 2009, will hit small businesses the hardest.

Collective premiums paid by small businesses had actually climbed at a slower rate in recent years, The Wall Street Journal reports. But now, some premium increases being quoted to smaller companies are double those quoted just a few months ago.

Insurers recently released their third-quarter earnings, reporting less aggressive pricing by competitors in a number of markets, making it easier to charge premiums that would assure a solid profit. For-profit health insurers have seen profit margins shrink this year in the face of higher-than-expected medical costs and pricing missteps, not to mention membership declines as more businesses drop or cut back coverage, the WSJ said. Large companies will have greater leverage to negotiate, but health insurers are reportedly being more rigid with smaller firms.

Another reason for the fee hikes are the mot-for-profit plans like Blue Cross and Blue Shield, whose investment portfolios have taken hard hits with the market in turmoil. The not-for-profits have also been under political pressure to reduce their big surpluses from flush years by providing price breaks to customers. Analysts say they now may have more cause not to.

A health insurance broker for small businesses in Illinois, said clients have been getting increases ranging between 28% and 31% this month, compared to typical increases of 18% to 20%. ❖