01/04/2011 05:29 pm ET Updated May 25, 2011

Small Business Health Care Plan Revisited

Perhaps the two greatest shortcomings of the Obama healthcare bill are its failure to contain two of the largest health care costs--medical insurance and pharmaceuticals. Maybe recognizing that President Clinton's attempt to provide universal, or near universal, health care was thwarted by the health insurance and pharmaceutical lobbies, President Obama chose not to regulate costs in those areas, and the results seem to me disastrous.

The state of New Jersey has provided small business employers with information and some guidance about what they must do to meet the new federal law. The information includes a comparison of rates offered by five different insurance companies that provide coverage in New Jersey.

The five New Jersey medical insurance companies have increased their costs year over year by roughly 20%. AmeriHealth raised its rates only 18.4%, while Health Net raised its rates 23.6%. Aetna was up 22%, Oxford up 19.9% and Horizon up 19.3%.

In computing rates, the state chose to base premiums on a "small employer with six employees and their dependents, as described below:"

• Single female employee age 27;
• Single male employee age 37;
• Female employee age 47, with two children;
• Male employee and spouse, both age 57;
• Male employee age 27, with spouse age 24, and two children; and
• Female employee age 47, with spouse age 50, and two children.

A company with those employees would pay monthly HMO premiums ranging from $5,690 a month for Horizon to $11,124 per month for Health Net. Aetna's premium is $10,654, AmeriHealth's $8, 676 and Oxford's is $5,324. HealthNet raised its premium prices by over $2,000 a month year to year, Aetna's premium went up by almost $2,000, AmeriHealth went up $1,300, Horizon's and Oxford's both about $900.

The new Medicare bill makes it mandatory for all small business owners with more than five employees to provide their employees with medical insurance. As of January 1st, small businesses must buy health insurance for their employees. The insurance companies are in a position to take full advantage of the situation, and they have done so. (I consider 20% hikes full advantage.) That all five of the New Jersey providers raised their rates by roughly 20% may not be entirely coincidental, but I doubt that state or federal officials will allege collusion, so we're stuck with what we've got.

In December, the Obama administration realized that insurers had been raising rates "significantly exceeding some national levels of cost inflation," according to Kaiser Health News. In 2011, "Health insurers seeking a rate increase of 10 percent or more in 2011 must publicly detail why the increase is needed [...] Under the proposal, the flagged premium increases would be subject to review by the states - or the federal government in some cases - to determine if they are unreasonable."

To me that sounds like "too little, too late." The people who wrote the health care bill should have foreseen the probability that insurance suppliers would raise rates once small business insurance was mandated, and therefore should have capped rate increases. They didn't do it, and now every small business owner is left to the mercy of his insurers, and most of us agree that insurance companies show little mercy.

For other information about New Jersey small employer health coverage, see this site.