A state attack on small businesses

Every day, shoppers walk the aisles of the grocery store we run and carefully select the food that best suits their families’ needs and budget. But imagine if we told our shoppers that they could only buy one kind of bread — and it happened to be twice as expensive as the brand they liked. Or that the only cut of beef available was filet mignon. Just need some inexpensive meat for stew? Tough luck.

We’d have some angry shoppers on our hands. And we would soon be out of business.

Unfortunately, that’s precisely what some New York lawmakers want to tell our 72 employees about the health benefits we provide for them and their families. These lawmakers are working to take away our insurance choices — and those enjoyed by thousands of other medium-sized businesses across the state.

Instead, the state wants to force us to buy more expensive, less generous coverage for our workers. That makes no sense — and must end.

Our grocery store is organized as a cooperative, owned by the members who shop there. For years, we bought conventional insurance in the small group market — and had to swallow large annual hikes in our premiums. When the coop tried to help employees shoulder high deductibles, our insurer charged us an 8% penalty.

So five years ago, we decided to opt out of the conventional insurance market — and self-insure.

Instead of paying a commercial insurance giant to cover our employees’ hospital and doctor bills, or keep our premiums as profit if our workforce stays healthy, the coop pays these costs directly. We hire a third-party administrator to put together a network of doctors and hospitals and process the claims, but that’s it.

To protect the coop in the event that some workers get really sick, we also buy what’s called “stop-loss” insurance. It pays claims when an individual (or the Coop as a whole) exceeds a certain high threshold. Stop-loss insurance financially shields the Coop from very expensive, large claims.

Since the switch, the coop has avoided upwards of $2.5 million in rising premium costs. That’s allowed us to keep insurance costs to about 2% of sales. Our peers who haven’t self-insured, meanwhile, have watched their premiums climb 20% or so a year.

Self-insurance also allows companies to tailor their health benefits to best suit the needs of their workers. For example, our plan provides certain benefits well beyond what state or federal law requires, responding to the needs of our employees and their families.

We’re hardly alone in going this route. According to the Employee Benefit Research Institute, 30% of businesses that employ between 100 and 500 workers selfinsure, up from 25% just a few years before. More than 14% of those with fewer than 100 employees, like us, do so.

Thus far, New York lawmakers don’t seem to support the growing popularity of self-insurance. They’ve already prevented firms with fewer than 50 workers from engaging in the practice by prohibiting them from purchasing stop-loss coverage. And they’re trying to do the same for any company with fewer than 100 workers, starting in 2018.

Lawmakers, under pressure from conventional health insurance providers, argue that if too many small and medium-sized businesses self-insure, only companies with sicker workforces will be left in the conventional small-group insurance market. Not only will those businesses that remain in that market face higher premiums; health insurance providers will see lower profits because of increased costs from a smaller and sicker insured pool.

Never mind that employers like us would see our health costs jump hundreds of thousands of dollars overnight if these state lawmakers get their way. We’d have to effectively cut our workers’ wages by forcing them to pay more for their care and potentially raise prices for our shoppers, the member-owners of the coop, who eventually foot the store's health bills.

There’s a reason that every state other than New York allows companies with between 50 and 100 employees to self-insure: it works. New York lawmakers shouldn’t dictate our insurance choices any more than they dictate our choice in groceries.