THE HIGH COSTS OF HEAVILY REGULATED AND HENCE BUREAUCRATIZED MEDICINE HURT WAGE-EARNERS

To say nothing of the litigation free-for-all that siphons off so many health dollars into the pockets of lawyers

Funding a small-company health plan isn't getting any easier for Hans Steege. The 33-year-old co-owner of Derovations, a $1 million (sales) commercial bike-rack manufacturer in Minneapolis, watched the company's health insurance premiums shoot up 19% in the last year. Now Steege wants to add a technician to his seven-employee roster, but fears his local health maintenance organization will juice rates even higher. "The health insurance thing is a motivator not to hire him," he admits.

To ease the burden, Steege is thinking about switching to a health savings account with a higher deductible and lower premiums. In that case, Derovations would set cash aside in a separate account to cover the deductibles; if the employees don't use the money by year's end, they take it home as part of their compensation. But Steege also is contemplating a far more draconian move. "The expense is growing so much that we are thinking about not offering health insurance as a benefit [at all]," he says. "And that puts our employees at risk."

Steege has plenty of company. Nearly nine out of ten small businesses are shelling out more for basic employee health insurance than they paid last year, according to a new study released this morning by Salary.com, a compensation consultancy in Needham, Mass. Half of the 304 small companies surveyed--from high-tech outfits to asphalt pavers and pizzerias--choked down between 10% and 30% increases, while nearly one in ten reported a rise of 30% or more.

Theories abound to explain escalating health care costs. Suffice it to say the health care market--unlike, say, the market for Gillette razor blades--is not a paragon of efficient supply and demand. Say you have a company with 17 employees, all over age 50. Depending on the local regulations, "you may still have to buy pregnancy insurance," says Scott Simmonds, a health care consultant in Saco, Maine, who works with small businesses.

The backlash: Small businesses are taking steps that have a direct effect on how employees are paid. The tactics run the gamut. One ploy: offering higher salaries, or lump-sum cash payouts, to employees as an incentive not to sign up for health insurance. "Many companies could offer employees a 10% salary increase [in lieu of health insurance] and still lower total payroll expenses in a given year," says Richard Cellini, head of research at Salary.com.

Other companies are lobbying workers to join their spouses' health plans, especially if they work for larger companies. Some employers are tweaking health care eligibility standards based on age, years of employment and hours worked per week. Still others are forming buyers' cooperatives with other companies to wangle bulk pricing. It's not that Steege and his small-business brethren don't want to do right by their employees. "When the company is very small, the employees are like family," says Cellini.

Of the 66 companies with 20 employees or less that Salary.com studied, 33% offered fully funded medical plans (in which the employer covers 100% of the premiums), more than any other size category. That percentage drops to 2.6% for companies with 200 employees and higher. The ugly flip side: 32% of the small fries offered totally unfunded coverage, the least generous of all the size groups....

More here

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For greatest efficiency, lowest cost and maximum choice, ALL hospitals and health insurance schemes should be privately owned and run -- with government-paid vouchers for the very poor and minimal regulation. Both Australia and Sweden have large private sector health systems with government reimbursement for privately-provided services so can a purely private system with some level of government reimbursement or insurance for the poor be so hard to do?

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