As the cost of medical insurance skyrockets to heights beyond the reach of most small businesses, members of the outdoor industry desperately need the relief that Association Health Plans (AHP) legislation, currently being debated in various Senate committees, may offer.
AHP, an amendment to title 1 of the Employee Retirement Income Security Act of 1974, is designed to "improve access and choice for entrepreneurs with small businesses with respect to medical care for their employees." However, the complexity of the issues involved suggests that the national health care crisis cannot be resolved simply through legislative action.
Small business owners hope to band together and acquire health insurance through a collective administration like a trade association. For several years now, Outdoor Industry Association (OIA) has worked on behalf of its members to acquire some form of group health coverage.
"The collective bargaining power of our members," said Frank Hugelmeyer, president of OIA, "should allow us the ability to purchase health care as a group at a more affordable price."
However, as a national organization with members occupying all 50 states, the issue becomes a lot more complicated. Because every state has its own laws and regulations regarding insurance liability, it is practically impossible to create a system through OIA that will meet the requirements of each. Separate policies would have to be negotiated for every jurisdiction. The cost to administer such a system alone makes it virtually untenable. Plus, benefits would vary from state to state allowing for little continuity between policies.
"It is a national challenge," said OIA Benefits Manger Jill Overdorf. "We're dealing with retailers that are working on margins that are already very thin. Many of our members simply cannot afford to offer their employees (medical) coverage. Unfortunately, there's not a lot we can do."
Overdorf pointed out the irony that, as a group, OIA members and the outdoor industry as a whole are less of a health risk than the general public. "They're all in great shape and few of them smoke." Yet obtaining health insurance for even our healthy cross-section remains cost-prohibitive.
One of the hardest hit by the health insurance crisis is the independent sales rep. As independent contractors, reps are conspicuously absent from the payrolls of the companies they represent. Even leading manufacturers with employees numbering in the hundreds and offer health plans to their in-house staff do not make these benefits available to their independent sales reps. The most obvious reason is that a majority of a company's external sales force lives and works outside of their home state. Liability issues make coverage difficult if not impossible. As sole proprietor operations, sales reps typically have the fewest choices and pay the highest premiums when it comes to obtaining health care.
Kirk Miller, an independent sales rep in Hanover, N.H., shared his insurance challenges. With a wife and three children, he managed to find a medical and dental plan that provides the coverage his family requires. He told SNEWS, though, that "between the two programs we spend nearly $30,000 per year. That means that commissions on the first $50,000 in sales each month go to cover health insurance. Auto insurance, etc. come on top of that."
"Even with gas prices hovering around $2 a gallon, hotel and food prices steadily increasing, and the general cost of doing business at an all time high, insurance is still the backbreaker of most independent reps!" said Indiana-based sales rep Michael Wagner. His premiums were bumped up this year to $1,200 per month.
And while some regional rep groups have begun looking into finding affordable health care for their members, all have discovered that it is virtually impossible for them to offer their members health insurance alternatives currently.
Camie Garrison, event coordinator for the Western Winter Sports Reps Association (WWSRA) based in Seattle, told SNEWS quite simply that offering insurance to association members is not possible. "In order for a not-for-profit organization like the WWSRA to act as proprietor of a group policy, it would have to assume all the costs and liabilities of its members' health care. We just can't do that," said Garrison.
She cited a recent example that illustrates what can happen to a trade group that bites off more than it can chew. A national organization known as the Bureau of Wholesales Sale Representatives (BWSR) orchestrated a plan to cover its members. Two claims of work-related injury resulted in large settlements, which bankrupted the organization and forced it out of business.
Although a system of so-called self-insurance spelled disaster for one organization, it has proved to be quite effective for another. When faced with premium increases of 40 percent in one year, Seattle-based Cascade Designs took its health plan in-house. Working through a third-party administrator, Cascade Designs covers its 300 employees with medical, dental and optical benefits, the same plan offered by Blue Cross Blue Shield.
"We cut out the middle man," said President Lee Fromson. "Every employee has a policy card they can take to their doctor and the plan pays. The hard part is managing the cash flow, as claims vary from one month to the next. But it's manageable. Health care costs for the company went up only 10 percent to 14 percent as a result."
A so-called Stop Loss insurance policy limits the top end in case of a claim of catastrophic injury or long-term illness. This protects Cascade Designs from suffering the fate of the BWSR, while giving its employees a worthwhile benefits program.
Leading outdoor retailer REI also works under a program of self-insurance. "Because we're not regulated by the same rules as an insurance company," explained Benefits Manager Gieselle Sampson, "we have the ability to offer coverage that most policies won't."
For example, REI offers its employees a massage therapy benefit. Coverage also includes acupuncture and hearing tests, services that most workers would never dream of receiving. REI's system of self-insurance gives the company the latitude to offer benefits for domestic partners, in spite of proposed legislation to limit the rights of gay and lesbian citizens. Quoting the results of a recent human resource satisfaction survey, Sampson reports that REI employees are most pleased with their benefits package.
The overall size of REI makes its plan possible. It experiences the same cash flow challenges as other self-insured companies, but it said it believes the investment in its employees' health is well worth the expense. It is obvious, however, that this system requires very deep pockets. A self-funded insurance program is out of reach for most small- to medium-sized companies. They, unfortunately, must seek the most affordable programs available on the open market.
The preferred solution to the health insurance crisis for many small businesses is the creation of a Multiple Employer Welfare Association (MEWA), which would allow employers to band together to provide group coverage. Unfortunately, many state regulations currently stipulate that a MEWA cannot be self-funded. This regulation is designed to protect the policyholders in the event the association goes bankrupt, as happened to the BWSRA. The MEWA stipulation would be lifted if AHP is successfully approved by the Senate and is signed into law.
Wisconsin Rep. Tammy Baldwin eagerly anticipates the creation of a national health care program; however, she voted against AHP. During a constituent listening session, Baldwin pointed out a fatal flaw in the legislation: "The bill as it reads now, removes all state regulation from the underwriting process. With no regulation, insurance companies would be free to offer less coverage for the same price. My concern is that those in our country who currently have good coverage will lose far more than those who don't (have good coverage) will gain. So that in the end we will all be insured, but under-insured. Which, in some ways, is worse than having no insurance at all."
Dan Greening, an agent at Mercer Human Resources Consulting, with offices throughout the country, confirmed Baldwin's suspicions. "Without state regulation, health plans could be so poorly funded that they would have too few resources to pay claims once incurred," he said. He envisions a "death spiral" in which rates would continually go up as policyholders receive fewer and fewer paid services.
Not all is doom and gloom, however. Experts we spoke with did explain that there are a variety of state and private programs that small businesses can already qualify for. Chambers of commerce in some communities, for example, offer their members lower-cost health benefits.
Baldwin proposes the drafting of new legislation that would allow small business owners to buy into the same programs offered to the employees of state and federal governments.
There are larger institutions that could also be of assistance in making affordable health care available to outdoor professionals. CCA Global, for example, a nationwide consortium of floor covering retailers with $8 billion in assets, recently forged a relationship with Giant, one of the world's largest bicycle manufacturers.
In a new program called "Bicycle Solutions," independent Giant retailers can now take advantage of deep discounts in a "buffet of services," including office supplies, long distance calling, waste disposal and, you guessed it, health insurance. Because of its deep pockets, CCA Global can provide the state-by-state policy administration that will allow all of its participating dealers to shop around for the lowest-priced, locally-provided health care.
SNEWS View: There is no easy answer right now to health care coverage, and that is unfortunate. With no universal health coverage in the United States, small businesses that don't generate gross revenues in the tens of millions of dollars have a great deal of difficulty finding affordable health care. We find the Giant and CCA Global partnership most intriguing, but wonder how much of a logisitcal nightmare this could become if enacted on a broader scale nationwide for any retailer? SNEWS will look into the Giant program in greater detail in a future article. While we commend OIA and others for the efforts on the legislative front with AHP, and we certainly believe that legislation allowing associations to offer health care to their members is a starting point, we also firmly believe that the best solution for long term benefits will be found through the alliances with other associations and small business groups, such as the one OIA has been involved with for the last two years. What direction that relationship eventually takes remains to be seen.