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When Andrew Froman decided to open a solo law practice in Sarasota, Fla., in August 1999, he knew it was going to be tough going. What he didn’t anticipate was the difficulty he would face simply obtaining health insurance for himself, his wife and son, and his secretary. The 44-year-old labor and employment attorney applied to Blue Cross and Blue Shield of Florida for HMO coverage. He chose to buy coverage in the individual, rather than the small-group, market because individual policies generally are cheaper for healthy applicants. But after he applied, the insurer’s medical underwriter misinterpreted information about his wife’s medical history. For nine months, he did battle with the carrier, providing reams of additional records to clear up the confusion. Meanwhile, the insurer refused to cover his secretary because she had a pre-existing medical condition. Finally, the company denied coverage for Froman’s wife while offering it to him and his son. He declined, choosing to buy a more costly small-group health maintenance organization plan for his family and secretary, offered by Aetna U.S. Healthcare. Under state and federal law, small-group plans are required to accept all applicants who have maintained uninterrupted coverage. Small law firms like Froman’s face growing headaches trying to provide health insurance for attorneys, family members, and nonattorney staff. The biggest problem is that premiums are rising much faster than the general inflation rate for employers of all sizes. According to a recent survey by the Henry J. Kaiser Family Foundation, premiums for U.S. firms rose 8.3 percent last year. Small businesses and law firms are experiencing even steeper increases — in the range of 15 percent to 47 percent, says John Sforza, president of Falcon Consultants Inc. in Miami, which helps businesses obtain health insurance. Experts say insurers also are less willing to cover small employers, particularly one-person operations. This hits lawyers hard, because two-thirds of Florida attorneys practice in firms with fewer than five lawyers. Four Jacksonville, Fla., insurance brokers recently sued HMO Mayo Health Plan, claiming that it dismissed them as agents because they sold policies to businesses with fewer than 10 employees. The HMO denies the allegation. “Many small firms are just not offering health insurance to their employees because they are priced out of the market,” says Laurie Amber of South Miami, who practices general law with her husband, Henry. Amber has seen the monthly premium for herself, her husband, and their two children rise from $743.90 one year ago to $896.10 now. She thinks the solution lies in a Canadian-style universal health insurance system. With premiums soaring, many law firms are opting not to pay premiums for non-attorney staff — and, in some cases, not to pay even for their attorneys, says J.R. Phelps, director of the Florida Bar’s Law Office Management Assistance Service, or LOMAS, in Tallahassee. According to a recent Florida Bar survey, 29 percent of law firms surveyed don’t offer coverage at all, and many smaller firms that do offer coverage have become less generous. Some no longer pay for employees’ dependents, while others are offering less comprehensive benefits. But these cutbacks create headaches for small law firms trying to hire the best attorneys and staff in a tight job market. Harold A. Diamond, regional director of the Stone Legal Resources Group in Boca Raton, Fla., a legal recruiting firm, notes that smaller firms have a harder time than larger firms in attracting talented, experienced candidates. So it’s particularly important for them to offer a good health benefits package, he says. One attorney who has decided not to offer coverage is Thomas Bell, a solo criminal defense and family lawyer in Jacksonville. He acknowledges that this makes it difficult to attract the best support staff. “A lot of folks ask for benefits, and understandably so,” Bell says, adding that he would offer coverage if” it made economic sense.” Robert Goldman a shareholder at Goldman & Fecoski in Naples, Fla., believes that’s short-sighted. His firm pays the full premium for preferred provider coverage from Principal Financial Group for its two shareholders, one associate and two paralegals — even though it faced a 15 percent premium hike last year. “We wanted to be competitive with the Steel Hectors and Greenberg Traurigs in terms of quality staffing,” Goldman explains. “The first place we had to be able to compete was in health coverage. If we don’t offer it, they will go somewhere else.” Emilio Benitez, a Fort Lauderdale sole practitioner in criminal and personal injury law, wants to continue offering coverage, but isn’t sure he can afford it. He was paying $107 per person monthly for himself and an assistant, but he recently received new quotes for $180 and $205. “I’m kind of stuck,” says Benitez, who notes that he’s one of the few solos in his law office building to offer employee health coverage. “This is hurting me to the point where I am considering not offering health insurance to my assistant. This isn’t right, because I believe people should get health insurance.” Another problem faced by law firms is rapid turnover in the physician and hospital networks offered by their health plans. Lisa Schiller, a partner at the five-attorney firm Rice & Robinson in Miami, says her firm switched carriers in 1999 after its insurer suddenly dropped several hospitals that were the preferred choice of the firm’s 15 employees. “What was the point of having health insurance if none of our employees could use it?” she asks. Many attorneys and small business owners may not realize that the Florida Legislature passed laws last year that could make their insurance situations even worse. The new rules allow health insurers covering employee groups of 50 or fewer members to vary premiums by up to 15 percent based on the claims experience of the group. In addition, sole proprietors now can apply for guaranteed-issue policies only during August of each year. On top of that, the state Legislature abolished community health purchasing alliances, which enabled small businesses to choose from a menu of plans with standard benefits and cheaper premiums. Instead, trade and professional organizations like the Florida Bar now can sponsor master policies and consolidate members’ individual policies into the master policy. But the Bar has no plans to do so, says Michael Tartaglia, the Bar’s programs director. It refers members to Business Planning Concepts, a Jacksonville insurance agency which can help them obtain coverage. Supporters of the legislative changes argue that the new rules will entice more insurers to enter the Florida market, and cause premiums for small employers to drop. But Rick Robleto, who oversees health insurance for the Florida Department of Insurance, says it’s too early to tell what will happen. The most likely outcome, he predicts, is that groups which employ healthier people will receive lower rates. Still, there are ways for small law firms to save on health insurance, experts say. Judy Equels, a LOMAS practice management adviser, suggests that small firms raise their per-person deductible to $1,000 to lower the premium. Then the firm can reimburse employees for part of any out-of-pocket cost they incur. Another option is for a group of small law firms to form a purchasing pool through an insurance agent and buy as a group. Employee leasing is another way to go, says Rjon Robins, a LOMAS adviser. Under this approach, a law firm technically leases its attorneys and other employees from a leasing company, which then arranges health coverage at lower large-group rates. The premium savings can equal or exceed the fee charged by the leasing company, and the firm also can save on administrative costs, Robins says. Still another option is purchasing a less comprehensive benefit package, then buying supplemental coverage for specific employees who need it, says John Sforza. For instance, a firm with mostly older attorneys and staff could buy maternity coverage for a younger employee. Some smaller firms are dropping health coverage entirely and paying higher salaries instead, says Harold Diamond. But even the savviest small firms may find themselves facing a disturbing choice if the health insurance crunch worsens. The only way for a firm to keep its premiums affordable, warns Jay Abramowitz, vice president of Pearl Benefits Group in North Miami and Kendall, will be to avoid hiring people with medical problems. His advice: “Hire healthy, hire young.” Daily Business Review staff writer Susan R. Miller contributed to this report.

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