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When my father was diagnosed with cancer in 1999, not once did my parents question the Cleveland Clinic about the cost of his medical treatments. To them, the dollars didn't matter. More important was understanding exactly how much time they had to find a cure.
Given less than a year, my dad began researching clinical trials throughout the country and was particularly hopeful about one taking place at Harvard Medical School. If Harvard wasn't a go, he'd travel to Germany where experimental treatments for lung cancer appeared promising.
1,500 victims a day
At the time, I was charged with managing our company's benefit programs, and I remember telling my dad not to worry if our health insurance plan didn't cover these experimental options. I joked, "Don't worry, Dad, we'll just raise a few retails in grocery stores to cover the cost."
Sadly, my dad never saw Harvard or Germany. At age 67, he passed away one month after his diagnosis.
My father was one of 1,500 people living in the United States who die of cancer every day. That's more than 10,000 victims per week. Perhaps even more shocking than the number of deaths caused by the disease is that cancer treatments alone represent an estimated 2 percent of our country's gross national product.
Much is to blame for the rising cost of health care—people living longer, new prescription drugs, the backlash against HMOs, and more. But family-owned supermarkets that continue to battle for sales and protect slim profit margins aren't interested in pointing fingers. Immediate cost relief is needed, and apparently there is none in sight. For store owners and managers, health insurance has become a major headache.
According to Frank DiPasquale, s.v.p. of the National Grocers Association, the cost of providing health benefits has in the past year surfaced as the No. 1 concern for retailers and wholesalers alike. In a recent survey conducted by NGA that was published in December 2002, members on average experienced premium increases in the range of 18.9 percent. Ironically, some who read the survey may find themselves asking, "How did those folks get so lucky?"
Retailers and wholesalers responding to a survey for Progressive Grocer's 70th Annual Report of the Grocery Industry, published with our April 15 issue, also cited health care costs as the most severe problem they face.
Late last year, Bill Orr, owner of Bill's Fresh Markets, a three-store operation in Jonesboro, Ark., was astonished to learn that his health insurance renewal reflected a 40 percent increase. Determined to maintain an affordable plan that would allow him to compete for the best employees, Orr was forced to make radical changes. To buy down the premium, he raised both prescription co-pays and medical deductibles, and he increased the amount employees must contribute. While he wasn't happy about the changes, they were his only option.
"Shocker premiums have forced us to evaluate every aspect of our plan and to be more aware of all expenses throughout the stores—supplies, register tapes, scale labels, you name it," says Orr. "And we're seriously considering raising margins on some items just to cover the health insurance increase, although that's not easy to do in such a competitive market."
He adds, "By making the changes, we settled for a 15 percent premium increase instead of the proposed 40 percent. In the past year, we've placed more emphasis on employee training, and we're sharing with everyone on a regular basis how much insurance costs the company."
"We've even gone so far as to offer non-smokers a $10 discount on their weekly contributions to the plan," Orr says. "We're doing everything possible to manage an extremely tough situation."
On the insurance side of the business, many carriers are doing everything possible just to stay afloat. According to Clark Swisher, s.v.p. of Leonard Insurance in North Canton, Ohio, a litigious society, the rising cost of malpractice insurance, overuse and misuse of prescription drugs, and medicine's technological advances are also contributing to skyrocketing health care costs. "Add to that a list of government mandates and a stock market that's negatively impacted the investment income of insurance carriers, and you get a system that I best describe as catastrophic," he says.
"Unfortunately, many patients today are quick to file frivolous lawsuits against doctors and hospitals," Swisher says. "That's forcing the cost of malpractice insurance to rise astronomically, and many physicians working in high-risk fields are bailing. Not long ago, specialists were paying approximately $250,000 per year for coverage. Today, they're looking at spending over $1 million for their annual premiums. General practitioners are also facing increases, though not as high."
Ultimately, says Swisher, "It's really the patients who lose."
Faulting the government
The 23-year insurance industry veteran, who serves on the boards of three public companies in northeast Ohio, is also convinced that the government must assume responsibility for our country's health care crisis. "The cost of introducing a new drug is higher than ever," he says. "According to the New England Journal of Medicine, pharmaceutical companies are spending anywhere from $300 million to $500 million to win the FDA's approval. And who pays that bill? Business owners and consumers."
According to Swisher, who services clients in six states, prescription drug inflation topped out last year at an estimated 26 percent. While he believes much of the increase is due to federal bureaucracy, he also holds drug manufacturers responsible.
"In recent years, pharmaceutical companies have been marketing directly to consumers," he says. "Television and magazine ads convince people that drugs are a quick cure for every ailment—acid reflux disease, high cholesterol, depression. The list goes on and on."
He continues, "The problem is that many of these drugs are new and we don't really know their long-term effects. Not surprisingly, the fourth leading cause for hospital admissions in the U.S. is from reactions to medications. It's my guess that prolonged use and misuse of prescription drugs will result in yet a new set of problems in the future."
During the stock market boom of the Nineties, the future seemed secure for soon-to-be retirees. Today, however, those in the 58-to-65 age group, who typically require more medical care, are finding it financially difficult to call it quits. Says Swisher, "The dot-com bust, declining 401K accounts, and Medicare supplement premiums that have increased by 100 percent during the past 10 years are forcing people to work much longer. That's driving up the overall health care cost for employers."
He's concerned about the future of the system, especially over the next five years. "While government intervention is considered by many to be the cure-all, I personally don't believe it's the answer," he says. "In the end, it's hard for me to imagine the IRS being in charge of health care."
Independent Retailing editor Jane Olszeski Tortola can be reached at [email protected].