Insurance Carriers Blacklisting Many Small Businesses
Small businesses struggling to keep health insurance coverage for their employees are being battered by many insurers’ blacklisting of certain kinds of work.
Most insurance companies have a restricted list of professions that they seek to avoid, said Steve Gorman, president of Alternative Health Insurance Services, a broker in Woodland Hills.
“Beauty supply places, salons, interior design firms and places where the insurance companies presume there is a high percentage of gay people will all be on the restricted lists,” Gorman said. Restaurants, hotels, motels and other trades with high employee turnover rates also have a hard time getting coverage, he noted.
One “ineligible” list, issued by an administrator’s firm offering health plans on behalf of several insurance companies, includes: actors and musicians, attorneys, barber shops, bars and cocktail lounges, beauty salons, doctors, farms and ranches, government agencies, junkyards, laundries, movie production companies, clergy and religious groups, talent scouts, trucking firms and used-car lots.
Another blacklist covers carnivals, circuses, chiropractors, maids, chauffeurs, hotels, massage parlors, morticians, trash collectors, bars, guards and detectives, schools and colleges.
“Some companies will bend a little bit, but for the most part it’s pretty definite,” Gorman said. “I had one insurance firm refuse a policy on a wholesale produce company because one of the owners was an attorney, and he wasn’t even asking coverage for himself.”
Many insurance companies assume that attorneys will sue them, doctors and nurses won’t tell the truth about their own health problems, and nonprofit organizations, such as charities and counseling groups, can easily lose their funding.
The ITT Hartford Insurance Group confirmed a report in the New York Times stating that it won’t offer coverage to a long list of businesses such as hotels, motels, restaurants, laundries and ski resorts. For any employer with fewer than 50 workers, the company will provide coverage only if there is a local network of doctors under contract with Hartford to provide medical services.
The increasing difficulty of getting insurance coverage is providing some of the powerful impetus for a plan by the Administration of California Gov. George Deukmejian calling for all of the state’s businesses to provide health insurance for their workers. The Deukmejian Administration is developing a proposal to cover 4 million of the 5 million state residents who lack health insurance.
The state of Washington has a pilot program covering 25,000 people--the “working poor” with incomes that are up to 200% of the poverty level--and Gov. Booth Gardner wants to develop a universal health insurance program. “You shouldn’t have to be rich or employed to have basic health coverage,” said Sheryl Hutchison, deputy press secretary for Gardner. He will make health-care insurance and cost control his major issue as chairman of the National Governors Assn., beginning in July.
Restaurant owners have long suspected that their industry was singled out as a bad insurance prospect but didn’t have formal proof, said Elaine Graham, senior legislative representative for the National Restaurant Assn.
“The smaller you are, the more difficulty you have getting health insurance,” she said, noting that 70% of the nation’s restaurants have sales of less than $500,000 a year. Statewide restaurant industry health insurance plans in Oklahoma and Missouri were abruptly canceled last year, leaving hundreds of eating places without protection for their workers, Graham said.
Carl J. Schramm, president of the Health Insurance Assn. of America, said there have “always been groups no one was anxious to underwrite.” However, “there is no occupation that absolutely cannot find insurance,” he said. “It may not be easy, but the (insurance) carriers are there.”
The use of restricted lists varies widely within the industry.
Prudential “is far more liberal than most companies” in offering coverage, spokesman Tom Joyce said. “There are some groups we do exclude, mainly hazardous occupations such as mining and work on oil rigs and circus work,” said Joyce. But the company doesn’t have a long list of other ineligible occupations.
With health costs rising much faster than the general inflation rate, most insurance companies are increasingly reluctant to undertake risky business. This makes it much harder for any company on the restricted list to switch insurers in search of more reasonable rates. Instead, the firms must swallow huge premium increases, restrict their insurance coverage or even drop it entirely.
If ordinary small businesses are hit by annual rate hikes of 20% or 25%, hard-to-insure businesses might find themselves staggering under the burden of 80% or 100% annual increases.
