September 10th, 2012
Did you Get a Pay Raise?
I got a pay raise yesterday. I received the renewal notice from my health insurance provider, HealthAmerica, and I found an increase in my premiums of 99.4 percent.
Of course, this is an increase in overhead expenses for me as a small business owner. But, looking on the bright side, I got a pay raise. Just ask my Uncle Sam if you don’t believe me. He says the benefit of receiving health insurance is personal income and must be taxed as such. In the seconds it took me to open and read the mail I got both a huge increase in overhead costs and a huge pay raise that requires me to pay more personal income tax without putting a dime into my household budget.
I’m not the only one who got a “raise.” All of the employees in my group plan got a raise. In fact, any American worker who receives health care as a benefit and whose provider increased rates received a pay raise and must show it as income on their tax returns. That extra “income” probably wasn’t withheld from the paychecks of those American workers. I bet many will be surprised to walk out of H&R Block with a smaller tax refund than they expected or, worse yet, a bill from the IRS due by April 15. Some of those people may have planned to use their refund to improve their homes with new doors or windows or otherwise stimulate the economy or improve their own lot in life.
I’ve been searching for answers since I received my notice of renewal … I mean my pay raise. Is it legal for a health insurance provider to double premiums? What are my options to reduce this increase to my overhead?
Fellow Chamber of Commerce members told me about companies whose health insurance premiums spiked 35-90 percent this year. My agent told me about companies who “carved” unhealthy people from their group to reduce the increase in their premiums. Virtually any group with members who needed to actually use their health insurance benefits–and many who didn’t –will see a huge spike in their premiums before the end of this year. Due to the new healthcare legislation, this is the last year insurance providers can raise rates by more than 10 percent without government inquiry.
For more than 50 years our company has paid 100 percent of the healthcare insurance premiums for its owners and employees. Providing that benefit accounted for 18 percent of our overhead and this premium increase would up the ante to 36 percent.
HealthAmerica has been our provider for the last seven years and during that time all of our group members were young and all of us, our children and other family members in our group, have been healthy, thank God.
This year we needed to use our health insurance benefits as my oldest brother, Gabe, the president of our company was diagnosed with a brain tumor at 55 years of age and needed healthcare. Because of that need we received a 99.4-percent increase in our premiums. My insurance agent told me he knows that is “not fair,” but insurance providers are allowed to spike premiums due to the illness of group members in the Commonwealth of Pennsylvania.
I don’t think any small business owner would envy the position we find ourselves in now. We are frantically trying to find creative ways to maintain quality care for my brother and the rest of our group without breaking the bank. I fear this increase to our overhead will diminish our price competitiveness in the marketplace. I must tighten my belt another notch at home because my take-home pay will be even less.
Our options aren’t pretty. Three years ago we received a renewal notice with a 36-percent increase. We increased our deductible and co-pay for doctor office visits to reduce the increase to 19 percent, but we kept our group a PPO instead of switching to an HMO. Now, to reduce our rates to an affordable level the options become ridiculous.
One provider suggested a plan with a $3,000 deducible, online doctor visits and severe limits for hospitalization coverage, but they would not be able to add Gabe for 13 months due to his pre-existing condition. Thirteen months might as well be a lifetime. Gabe’s pre-existing condition seems to leave us stuck with HealthAmerica at least until Gabe recovers or is deemed eligible for long term disability by Social Security and accepted into Medicare. HealthAmerica knows it, and apparently they have the legal right to rake his family and our entire group over the coals in the meantime.
I admit I have not followed the new healthcare legislation as closely as I should have. The legislation is thousands of pages long and I understand many of those who voted on the healthcare bill did not even read it. If you can admit the same, recognize this. Your business is affected by healthcare benefits and their costs. I ask members of the business community to become more aware and involved in the future of healthcare and its costs, even though I know in my own case I get lost in the rhetoric.
Here is an even more urgent plea to my fellow business owners: get disability income insurance. Do it today. Tomorrow may be too late.
Gabe has been disabled and unable to work since his operation in January. His neurosurgeon was able to remove a significant portion of the tumor and found it cancerous. Gabe has been battling with all his might, but anyone who has dealt with cancer knows it can be a very tough fight. His radiologist has slowed the growth of the remaining tumor. His oncologist has prescribed medications to limit seizures and reduce delusional hallucinations. His behavioral therapist exercises his short term memory and trains him to structure a daily routine that fits his “new normal.” Fighting cancer and rehabilitating his body and brain is Gabe’s full time job now.
We miss Gabe’s valuable contributions to our company. More importantly, we are concerned for the health and welfare of our brother, his wife and his children.
As a business owner, one of your greatest assets is the ability to earn income. If you were to lose that ability due to a disabling accident or illness, how would you pay your bills? Send your kids to college? Save for retirement?
Thankfully, we listened to our insurance agent’s advice and invested in disability income insurance many years ago and faithfully paid the monthly premiums. Because we did Gabe will receive his full salary until he is 65. If we had not purchased this insurance he would not receive his pay.
As an owner of a company, Gabe is not eligible for Pennsylvania Workers Compensation disability benefits like his workers, even though he’s paid his fair share. Gabe has contributed to funding that program with each paycheck he ever received for the last 40 years and our family has matched each of our employees’ weekly contributions to the fund dollar-for-dollar since it was created.
A disability can create substantial economic hardship for individuals and their families. As a business owner, both your personal finances and your business could be at risk. One way to protect against the financial loss associated with a disability is to purchase disability income insurance. And don’t forget to take a close look at your renewal notice over the next couple of months. If you needed to actually use your health insurance benefits recently, you and your employees may all be getting a big, fat, juicy raise, just like me–a raise in your personal income tax bill and your company’s expenditures for health insurance benefits, that is.