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Insurance: With & Without

SISTERS Carol Burgess and Lisa Lineberg slice bagels, tote bags of flour, run the cash register, wait on customers, and mop floors at the Chesapeake Bagel store.

They own the business. Seven years after they opened their franchise, they have finally made it into the black. "There aren't many days I'm not here before 6 a.m.," Burgess said. Many nights, they don't wrap up the catering orders until 7 or 8, sometimes 11 p.m.

The Mingo County natives and their 15 employees often joke together and greet customers by name. "Carol and Lisa are like family," said 62-year-old cashier Nancy Billanti. "If you need financial help, they help you. They've helped a lot of these young people when they got in a pinch."

When her husband was in the hospital, Billanti said, Burgess let her take a week off with pay. "She said for me not to worry about it."

The sisters dig into their own pockets in part because they can no longer provide health insurance. "We've scratched around to find the best deal we could offer," said Burgess. "We would love to provide full coverage for our employees, and we would love to pay for it. But we can't afford to do that anymore."

Since 1996, they have gone through three insurance plans, trying to keep ahead of rising premiums. "Each time we changed, we had to offer a little less," Burgess said. "I hate it."

Many of their Capitol Street neighbors are in the same boat. "We all talk about it a lot," said Burgess.

  • Aoleen Stavrulakis, co-owner of Mykonos Café, five doors up: "We used to offer insurance to all our employees, a deal where we paid half and they paid half. But we dropped it the first of the year. I feel bad, but I had no other choice. It had become just too expensive. Right now, I don't even have insurance for me and my husband."
  • Amanda Terry, manager of The Dresser: "I don't have insurance, and I just hope I don't get sick."
  • Denver Sirbah, manager of Larry's Giant Subs: "You can buy into the plan, but it's too expensive if you're not in management."
  • Ellen Beal of Ellen's Ice Cream: "I hate to talk about it, it's so upsetting. I can't get a good manager without insurance. It's reached crisis point, and the government isn't doing anything."
  • Phil Aldrich, owner of Aldrich Business Forms and Supplies: "With the economy we're in, it's difficult just to pay the bills. There's no way a business of my size could pay for insurance."
  • Ivor Sheff, owner of Ivor's Trunk. "That's why companies are only hiring part-time employees nowadays. We need a large buying group."
  • "Everything in my price range now seems like it has something fishy about it," Burgess said. "It might look good on first glance, but when you look closer ..."

    "The system that depends on health insurance that comes through the workplace is breaking down," said Jerry Flanagan, consumer advocate at The Foundation for Taxpayer and Consumer Rights. "A lot of small business owners genuinely want to offer insurance, but basically, the only thing they have access to now are empty plans that may or may not be available when the employee gets sick."

    Larger businesses aren't far behind. McCabe-Henley covers all their employees through Carelink. "We're trying to tighten up our deductibles and in some ways contract the coverage," said owner Brooks McCabe. "But we're still faced with significant price increases, and we've had to eat the difference." They checked out other plans, "but we got the same story from everybody."

    "We're not talking small change when we talk insurance," said Chesapeake Bagel customer Roger Forman. Forman, senior partner of the Forman and Huber law firm, said his firm pays $38,400 a year for basic insurance for 14 people. "That's a nice big hunk every month."

    His 32-year-old male law partner costs $211 a month, and a 42-year-old female secretary costs $590. "I think we should all share the risk equally, so I'm for national health insurance," he said. "I'd much rather pay whatever extra taxes it costs, so everybody had health insurance."

    'I only make so much'

    At Chesapeake Bagel, the regular morning customers drink coffee, trade gossip, and read newspapers. Wall Street Journal readers regularly scan front-page stories with titles like "Health Coverage Is a Big Burden for Little Firms" and "With Medical Costs Climbing, Workers Are Asked to Pay More."

    Plowing through those articles, they find that:

  • Eighty percent of United States business owners who do offer health insurance plan to cut benefits and/or shift more cost to their employees in 2003, according to the Kaiser Family Foundation.
  • Many large national corporations are downgrading to "limited benefit" health insurance policies that limit total payout to only $1,000 per year.
  • In June, only 1 percent of small business managers nationwide said they planned to hire new employees, according to the National Federation of Independent Businesses (NFIB). They cite health care costs as a major reason.
  • U.S. small businesses say the cost of health care is their number one problem, according to a wide-ranging NFIB survey.
  • Of course, every business owner does not want to insure his or her employees. Four out of 10 West Virginia small business owners recently told West Virginia University they would not offer health insurance at any price.

    Burgess said she and her employees have talked about insurance. They know that by the numbers, this is now an impossible goal for them.

  • A basic small group insurance policy in West Virginia now starts in the $225 range per person, according to the state Insurance Commission.
  • Half of the uninsured people in the state — including most restaurant and retail employees — make less than $20,000 per year, according to a WVU Health Policy Institute survey.
  • Most employees in that wage range cannot afford co-pays above $50 a month and many of their employers can't afford more than $100 a month per employee.
  • Karen Pollitz, Georgetown University researcher, operates a Web site called healthinsurance

    info.net. "At the end of the day," she said, "the small businessperson says, 'I only make so much money. I want to offer benefits, and I want to buy as much coverage as I possibly can.' But if a small employer can only afford to spend, say, $100 a month per employee ... then the co-pay is going to be a problem" for people who make below $8 an hour, she said.

    "I can't even think about it [$150 a month]," said Chesapeake Bagel cashier Nancy Billanti. A good chunk of her take-home pay has to go to her husband's heart doctor, she said.

    People who earn more than $25,000 may not understand why even a $60 co-pay can be tough, said Joy Doss, manager of Taylor Books "But the people I work with, most of them don't have somebody at home who can help them out. They're paying about $300 a month rent, usually sharing a place with somebody else. Plus they have to eat and get to work. If they have a car, that means parking.

    "We start most people out fairly well above minimum wage, but even with that, after they pay their bills, they have a little spending money left. If they spend $30 or $40 every two weeks on insurance, that would be their spending money. And they don't want to lose that.

    "So we offer insurance and pay 80 percent of the premium, but most people still can't take us up on it."

    'We wanted to be different'

    Seven years ago, the year Burgess and Lineberg sold their first bagel, they also offered health insurance to their full-time employees. "We were really proud. It was decent coverage."

    "Lisa and I wanted to provide insurance for everybody. We wanted to be different that way from a lot of other restaurants," Burgess said. "Our dad worked in insurance in Williamson over 40 years, and that's something we wanted to do for people who work here."

    "We thought it would help us keep good employees, too," Lineberg said. "It's expensive to train new employees."

    Premiums were $160 a person then. They paid the entire premium for full-time employees, who then paid a $15 co-pay for a doctor visit.

    "We thought we'd start with that and build from there," Burgess said. But just as they opened the store, the price of health insurance started a steep climb.

    Their second store in Huntington went bust. And meanwhile, the cost of U.S. health care — and health insurance — doubled, thanks to huge increases in the United States price of prescription drugs, hospital costs, and medical salaries, plus insurance company stock market losses.

    The sisters' first company, American General, hit them with hefty rate hikes. "Every year, like clockwork," Burgess said.

    They switched to American Medical Securities to avoid asking employees to pay a co-pay. "They paid well, and their coverage was decent, but their rates went up too high, too."

    "It drove me crazy," Burgess said. "We couldn't understand why it kept going up so high. We weren't filing a lot of claims."

    They were taking a crash course in the realities of small business insurance in the United States:

  • The smaller the business, the more likely the rate hike: In West Virginia, any small business is its own "pool." If one person gets cancer in a pool of 2,000 people, the expense is spread among thousands, so everyone's bill inches upward at worst. But if only 2 to 20 people are in a pool — the Chesapeake Bagel size — an employee in the hospital for a week can send everyone's premium zooming up. "If a new employee comes on, it goes up," Burgess said.
  • Most insurance companies require that at least 60 percent of eligible employees sign up, before they issue a group policy. They want to make sure they're not just getting the people most likely to file claims. But most Chesapeake Bagel workers — like many restaurant workers — are in their 20s. Many don't expect to get sick.
  • "A lot of my young employees, they'd rather have a raise or they'd rather have the money," Burgess said. "They could care less about insurance."

  • Most insurance companies require a waiting period of between three and 12 months before a new employee can be added to insurance. In a business like Chesapeake Bagel, with high turnover, this makes it harder to achieve a pool.
  • Under the West Virginia small business system, if an employee is older, a female of child-bearing age, or has a history of high claims, the price goes up for everybody. But in thirteen other states, insurance is "community-rated," meaning the price is the same for everybody, because all or most businesses are in the same pool.
  • State-regulated group insurance must cover conditions required by the state: nursing services, mammograms and pap smears, emergency services, postpartum hospital stay, child immunizations, diabetes coverage, colorectal cancer screening, mental health parity. So businesses like Chesapeake Bagel cannot buy limited benefit insurance. Businesses that create their own health insurance plan and pay all claims and costs from their own funds are not regulated by the state. They can include or not include whatever they want.
  • Most insurance companies will not allow an employer to include employees who work less than 30 hours a week, unless they pay extra-high prices.
  • In 2002, Burgess and Lindberg signed up with their third company, Pacific General. "The coverage we could afford wasn't even that good," Burgess said. "And then they didn't pay half our claims. They told us we'd get all these discounts that didn't happen."

    "By that time, there were just three of us left on it," Burgess said, "and our total premium was $1,200 a month."

    Earlier this year, Pacific General told them their premium would go up another $400. Now they're casting about again. "We've tried," Burgess said. "And we're still hoping to find something."

    She questions the practice of making each small business be its own pool. "Seems like there should be some way restaurants and small businesses could band together and buy insurance together, so we'd have a big pool and get better rates. Why do each of us have to buy by ourselves?"

    Two blocks down Capitol Street, at the Charleston Chamber of Commerce, Linda West, senior vice-president, sighed when asked if they would organize a pool for small businesses. "We did that for years," she said. "But with prices going up, it just got too difficult."

    So Burgess and Lineberg — and many other employers — keep plugging holes in the dam. In July, one of their young workers had a baby. "They helped her," said Billanti.

    It was a drop in the bucket, Burgess said, compared to what good insurance would provide. "You have single mothers who can't afford to get the insurance, yet they can't get the medical card, because the government says they make too much money."

    "This is really a classic story," said Consumer Advocate Jerry Flanagan. "It really is a clear picture of the problem: Many people who are working can't afford coverage anymore. Adequate health care is becoming more and more an entitlement for the wealthy. Is that what people want? I don't think so."

    To contact staff writer Kate Long, send e-mail to katelong@wvgazette.com or call 348-1798. Former staff writer Jan Boyles contributed to this story.

     

     


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