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Shops Absorb Rise in Cost of Health Policies

Published January 5, 2009


NASHUA, NH—In the midst of a tough economy, retailers are dealing with yet another challenge: rising health insurance premiums. Small and large retailers alike are facing steeper premium increases, with both having to make tough choices for themselves and their employees for the new year.

Brad Hill, owner of Goodale’s Bike Shop, with three locations in New Hampshire and 55 employees, will see health insurance premiums rise 27 percent this year.

“I’m not happy about it,” Hill said. “We might have to change our policy if this continues.”

Currently, employees who have worked at the company for five years are covered 100 percent. “Employees might have to start to contribute,” Hill said.

Furthermore, Hill said, because many of his employees are covered through their spouses’ plan and not by Goodale’s, it makes it that much harder to get a reasonably priced policy, as insurers give more favorable rates to bigger companies.

Citigroup recently released a nationwide survey of 30 insurance brokers showing that more insurers are raising premiums at a faster rate than those that reported slowing increases.

And according to a recent report in the Wall Street Journal, Wellpoint, UnitedHealth and Humana all reported less aggressive pricing by competitors in a number of markets, making it easier to charge premiums that would assure a solid profit.

Fred Clements, executive director of the National Bicycle Dealers Association, called rising premiums an “ongoing issue” for many dealers.

“I think it’s part of the larger problem dealers face in being able to provide quality employees with enough pay and benefits for them to consider bike retail a viable career path,” Clements said. “Without that, it’s hard to attract and retain the kind of quality people they need to really succeed.”

Clements said that several years ago the NBDA endorsed a health insurance program for members. Unfortunately, the program faded as the NBDA didn’t have enough clout to negotiate for lower premiums.

“Also, a few years ago a law passed that prohibits associations from using members to form a group for health insurance purposes, and I believe that did impact a number of groups,” Clements added.

Retailers lack avenues to defray these increases other than offering employees less coverage or raising deductibles.

George’s Cycles & Fitness, which operates three stores in Boise, Idaho, pays for 80 percent of its employees’ healthcare, but if rates continue to go up, it could decrease that share to 50 percent.

“We can only afford so much,” said Mike Cooley, co-owner of George’s Cycles & Fitness.

George’s also offers its employees a healthcare savings plan, where a certain amount of money is set aside each paycheck to pay for doctor visits, acting as a supplement to that individual’s health plan.

Dottie Jessup, owner of Florida’s Chainwheel Drive, had to raise deductibles on both of the shop’s insurance plans to compensate for its 12.5 percent premium increase. Chainwheel Drive currently pays for 50 percent of its employees’ healthcare plans.

“We have many employees who have been with us for a while,” Jessup said. “They are generally a healthy bunch who take good care of their health. The decision to bump up the deductible wasn’t made lightly, but only after much discussion with our insurance agent, research and thought.”

Jessup and her insurance agent met with staff, communicating the shop’s options and the decision to raise deductibles.

“We communicate with our employees and keep them informed about what we’re doing,” Jessup said. “Several have expressed their appreciation to us for making the effort to get the best benefits we can find.

“By bumping up the deductible, we were able to keep the increase in monthly premiums to a negligible amount, thereby not affecting overall employee compensation significantly,” Jessup said. “Florida is facing lots of challenges economically and we want to do the best job we can do for our staff in keeping expenses in line as we go into the uncertainties of this year.”

University Bicycles manager Lester Binegar said his Colorado shop’s insurance plan will come up for renewal in April. Even though Binegar expects rates will go up, he wants to keep the current 50-50 insurance plan in place for his employees.

“Our advice would be pretty basic,” the NBDA’s Clements said. “Shop around, consider high deductibles if cost is an issue, and run a successful business that can afford competitive compensation for good employees.”

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