Brown Dog Construction owner Joseph Burke prides himself on being a responsible employer and offering BlueCross BlueShield of Tennessee health benefits to his four employees.
But rising rates are making it tough.
Two years ago, monthly insurance premiums ran about $225 for each of his employees, he said. Now, with rates closer to $350, Mr. Burke said he's forced to consider cuts.
"In this kind of an (economic) environment, where you're trying to survive in the industry we're in, the only way to survive is trying to control your cost," he said. "It's a lot of hard decisions to make."
For him, those hard decisions include laying off eight workers in the last year.
Many employers and workers already struggling with stagnant or declining sales and wages are facing similar hard choices as they try to absorb increases in health care costs that continue to outpace most other expenses. Many smaller employers are facing much higher increases in health insurance costs, according to local insurance brokers.
David Wills, a Chattanooga-based insurance broker who sells health insurance policies to area businesses, said renewal rates for the same policies are costing most employers from 12 to 15 percent more than a year ago.
"But I've had some small business owners that have had a 30 to 40 percent increase due to demographic and health factors," he said.
Russ Blakely, who owns a health insurance consulting company that works with more than 100 Chattanooga area employers, said increases for most employers are higher this year than last.
"It couldn't come at a worse time for many businesses that are already struggling," he said. "Nobody has dropped coverage altogether, but employers are looking at different plan design changes that may not have done in the past."
To limit the increases, most employers are "buying down" their policies by raising deductibles, cutting benefits or increasing the employee's share of premiums, local insurance agents said.
Jane DuBose, director of health plan analysis for HealthLeaders in Nashville, said the increase in health insurance premiums slowed some last year as a growing number of companies shifted to health savings accounts and other forms of consumer-driven health care.
"But most people believe it will probably spike again by the middle of 2009," she said.
As the economy falters, employers and their workers must shoulder increased health insurance premiums and out-of-pocket costs.
Ms. DuBose said with fewer people insured because of job losses, costs are shifting more to smaller and often older staffs. That tends to drive up commercial insurance rates, especially for small employers, she said.
Jerry W. Burgess, president of the HealthCare 21 Business Coalition, a nonprofit group that operates in East and Middle Tennessee, said as the population gets older and more people are overweight, health care costs are likely to continue to outpace inflation.
"Health care is different and doesn't behave like the rest of the market," Mr. Burgess said. "The consumer is still, by and large, insulated from the costs of service, so they continue to demand more regardless of cost."
Linda Andreae, senior vice president for BlueCross BlueShield of Tennessee, said most employers have raised deductibles, increased co-payments or added more disease management programs to hold rate increases below 10 percent this year.
"We're very cognizant of the fact that this is a real pressure for our customers," she said. "We feel like the solution has to come from all of us - carriers, providers, governments and from members themselves taking better care of their own health."
Health plans that provide wellness and disease management programs and financial incentives to encourage healthy habits seem to be doing better to limit costs.
At Cigna Corp., Mid-South Division President John Sorrow said the company's Cigna Choice consumer-driven health plan actually cut premiums for participants by 3.3 percent last year while premiums on traditional insurance plans rose 10.6 percent.
The Hamilton County Schools system is facing a 12 percent increase in health insurance premiums next year if it doesn't change its coverage, which will cost the system an extra $5.2 million at a time when officials don't expect to have any extra money. School closings and layoffs may be needed, in part, to maintain current health care coverage, according to Tommy Kranz, the school system's chief financial officer.
"It's absurd, isn't it?" he said. "We, as a society, never want to die. Our country has the luxury of pursuing drugs and technologies to make that happen."
Sheila Boyington, owner of Thinking Media, said her company's health insurance premiums have grown at least 20 percent a year since her business was started 11 years ago.
"We could hire more people, but when you have to add about $1,000 extra a month for health care costs, that becomes a whole other place you have to evaluate," she said. "It's a tremendous cost for a business like us."
Rick Jenkins, owner of Emanon Manufacturing Technology in Chattanooga, said he employs seven people and pays half the health insurance premiums for the six who choose to get insurance. But lately, keeping his business afloat has become more of a priority than supplying those health benefits.
"The only way the employer can pay any of it (health insurance premiums) is through profits," he said. "I have more concern with the economy right now than I do with health care. If the business is not there, then all the sudden we may not be able to continue the coverage."