Welcome to Health Insurance Season

Businesses should expect the steepest rate hikes in years.

Good Morning!

Here are today’s highlights:            

• Employers are shifting their focus toward retention.

• There’s a company called Picklemall, and it’s converting ailing malls into pickleball courts.

• Inc magazine seems to think that online lenders are a business owner’s best friend.

HEALTH INSURANCE

We’re heading into open-enrollment, and the news isn’t particularly good: “Costs for employer coverage are expected to surge around 6.5 percent for 2024, according to major benefits consulting firms Mercer and Willis Towers Watson, which provided their survey results exclusively to The Wall Street Journal. Willis Towers Watson, which goes by the initials WTW, projects the increase will be the biggest in more than a decade. Such a boost could add significantly to the price tag for employer plans that already average more than $14,600 a year per employee, driving up health-insurance costs that are among the biggest expenses for many American companies and a drain on families’ finances.”

• “Among the factors leading to the faster health-insurance cost growth are hospitals’ higher labor costs and heavy demand for new and expensive diabetes and obesity drugs. The employer-plan increases are expected to strike businesses of all sizes, and regardless of whether they rely on an insurer to handle their health coverage or are self-insured.”

• “Retail-display maker Bench Dogs was hit with a 24 percent health-coverage increase when its plan renewed on July 1, but didn’t boost the share of the insurance cost paid by employees—currently set at 20 percent for a single worker, and half for one covering a family—or expand deductibles.”

• “Rich Broadbent, president and owner of the Denver, Pa., company, said he didn’t want to increase the burden on its approximately 75 employees, especially with competitors attempting to poach some of them away. The company has raised its own prices to cover mounting costs including healthcare, he said, but if it isn’t able to do so in the future, he might be forced to increase workers’ out-of-pocket costs for care.”

• “‘It’s a very difficult situation,’ Broadbent said.” READ MORE

HUMAN RESOURCES

Employers are focusing less on hiring and more on retention: “Companies are dropping signing bonuses from their job postings as they shift from an emphasis on recruitment to retention — and are offering the benefits to match. The share of job postings on job-search website ZipRecruiter offering signing bonuses was growing substantially during the course of the pandemic, from 3.3 percent of all jobs offering such an incentive in 2019 to 6.7 percent in 2021. But that number fell in 2022 to 5 percent and, so far in 2023, to 3.7 percent, nearly on par with before the pandemic.”

• “Instead, employers have been adding other benefits, with the percentage of employers offering health insurance in job postings growing from 3.8 percent in 2019 to 6.7 percent in 2023, according to ZipRecruiter. The number of companies advertising retirement plans has grown from 10.3 percent in 2019 to 17.2 percent in 2023.”

• “Other indicators are showing salary increases slowly coming down, although not to the pre-pandemic levels companies had gotten used to. The Federal Reserve Bank of Atlanta’s Wage Growth Tracker dropped to 5.7 percent annual wage growth in July, down from the 6.7 percent peak in August 2022 but still higher than at any other point in the past 25 years.” READ MORE

RETAIL

At least one thing is going right for retailers: “The pickleball craze overtaking recreation centers and repurposed tennis courts across the country is ushering in major shifts in the retail landscape. Running stores are stocking up on pickleball shoes. Walmart has tripled its shelf space for paddles, balls and other merchandise. Start-ups like Picklemall are turning ailing malls into indoor courts. But Americans’ fascination with the game also marks the rare convergence of sport and lifestyle, much like yoga, aerobics and jogging did in years past. Moisture-wicking tennis skirts and racerback tank dresses transition from workout to streetwear, and are big sellers for brands like Lululemon and Nike.”

• “Kinsey Watkins has dropped about $1,000 on pickleball, and it’s only been three months. Watkins plays two to three times a week (sometimes as many as six times) as she’s built out her gear: court shoes, pickleball balls, cooling towels — a necessity in the Dallas heat — and an array of tennis dresses and skirts.”

• “She just picked up a second paddle and is on the hunt for a pickleball bag. ‘This has been such a positive influence on my life. So it’s definitely worth it for me to keep putting money into it,’ the 29-year-old consultant said. ‘And I want to look cute and stylish — that’s very important to me.’”

• “Hollowed out malls and big box stores are getting new life with some vacant storefronts being transformed into pickleball courts. Pickleball facilities have taken over a Saks Off 5th in Stamford, Conn.; a Belk in Macon, Ga.; and an Old Navy in Concord, N.H.” READ MORE

FINANCE

Inc magazine seems to think that banks should lend money based on what businesses “could” do and that online lenders are a bargain : “Ever wondered why small businesses, the real heroes of our economy, have a hard time getting a loan, even with all the banks around? It's a weird twist, but let's break down why this happens, and some of the issues small businesses may face with a traditional lender. First off, banks can be a little old-fashioned. They tend to look back at what you've done, not forward at what you could do. So, if you have a small business with big plans but a short history, you're probably out of luck. Seems like they're missing the point, right? Then there's the size thing. Banks love big loans because they're more profitable. So, small businesses, needing smaller loans, often get left in the dust. It's a bit like being the last kid picked for the team--not fun.”

• “And don't get me started on the ‘one-size-fits-all’ approach. Every small business is unique, like a snowflake! But banks keep trying to fit everyone into the same old box. It's like using a hammer when you need a screwdriver--it just doesn't work.”

• “Let's talk speed. Or lack thereof. Banks move slowly, but business opportunities come and go quickly. By the time the bank money shows up, the ship might have already sailed.”

• “But hang on, the news isn't all bad. In fact, things are looking up, thanks to some new players in the field, called alternative lenders. These are online lenders, peer-to-peer platforms, and digital banks. They're the rebels, the game-changers, and they're turning things around for small businesses.” READ MORE

The Nobel Prize-winning father of microfinance is facing a jail sentence: “Among foreign economists and civil society activists, the Nobel laureate Muhammad Yunus is an icon for extending microloans to those too poor to access conventional banks. But at home, in Bangladesh, he has been increasingly vilified—and now faces time in prison.  Sheikh Hasina, Bangladesh’s prime minister, has routinely torn into Yunus, calling him a ‘bloodsucker’ of the poor for coercing loan repayments, and even blaming him for the World Bank’s 2012 decision to withdraw from a crucial bridge project. Most recently, Yunus and his associates at Grameen Telecom—separate from Grameen Bank, his pioneering microfinance institution—have been put on trial in a labor law violations case.”

• “176: The number of signatories on an open letter to Hasina, including more than 100 Nobel laureates, world leaders like ex-U.S. president Barack Obama and the former UN Secretary-General Ban Ki-moon, calling for a stop to the ‘continuous judicial harassment’ of Yunus. The letter ran as a full-page ad in the international edition of the New York Times.” READ MORE

STARTUPS

Joe Gebbia, a co-founder of Airbnb, is going after the additional dwelling unit market with a startup called Samara: “Our value proposition is that we do everything. So a customer goes to samara.com and configures their unit— it’s very similar to purchasing a Tesla online. We take the order and we handle everything from that point on. We basically become the project manager on behalf of the customer. We handle the heavy lifting ... everything, from the factory construction to the delivery to the installation, to the site prep, utility hookups, the permitting, from soup to nuts.”

• “My background is in both graphic design and industrial design, I was trained to really care about every detail. The Backyard product has been incredibly thoughtfully curated and designed, from the 10-foot plus high, cathedral ceilings inside to the placement and sizes of the windows that provide natural light. Sure, it’s 500 square feet, but it’s the kind of space that you’d actually want to live inside.

• “It’s the early days at Samara, we are a small team, but we’re taking the same steps as we did at Airbnb to design a culture around creativity, hustle and simplification, to make things really simple for the customer. Whether that’s in the physical products, whether it’s in our website, whether it’s in the decision-making process. That’s one thing I’m definitely bringing over from Airbnb.” READ MORE

REAL ESTATE

Even in New York City, home buyers are being encouraged to think more about climate change before they buy: “‘It doesn’t come up as often as it should,’ says Ellen Sykes, a licensed associate real estate broker at Coldwell Banker Warburg. ‘I’m always surprised. I either think [the client] is smart, they know what they’re doing, or they haven’t a clue.’ To Sykes, who remembers the damage Hurricane Sandy wrought on the city, extreme weather caused by climate change should be something home-buyers consider before putting down roots. But it can be easy to ignore.”

• “There are a handful of things a potential home buyer can look for in NYC’s crop of condos, co-ops, and brownstones that would make a building more resistant to the weather events—like floods and wildfires—including the building’s location on or off of a floodplain, where its mechanicals are stored, any special certifications, and its ventilation system.”

• “Floods can have a huge impact on property, even for those who live on higher floors. If a building stores their heat, electricity, or elevator mechanicals in the basement, a flood can knock out those systems, resulting in expensive repairs and interrupted service. And floods are likely to increase as sea levels rise and storms become more frequent.” READ MORE

THE 21 HATS PODCAST

In this week’s bonus episode, Dr. Randy Spencer talks about the changes that have been roiling vet businesses: For one thing, that pandemic puppy boom we all heard about has brought additional stress to veterinary workers who had already had more than their share. For another, there’s been a wave of corporate money and private equity flowing into the industry. That sounds as if it could be a good thing, and Spencer says he’s been dodging a constant series of acquisition inquiries for years. But the big money has also engendered considerable turnover and disruption, and in response, Spencer decided to sell 100 percent of his business, 1st Pet Veterinary Centers, to an employee stock ownership plan in 2021. The transition to an ESOP remains something of a work in progress, in part because veterinary people tend to be more focused on pets than they are on profits.

• “Veterinary medicine,” Spencer says, “is just the best profession in the world. In a way, it's a service industry, but we get to serve pets. That's why veterinarians get into it.”

• You can subscribe to the 21 Hats Podcast wherever you get podcasts.

Thanks for reading, everyone. — Loren