By Lee Egerstrom, Saint Paul Pioneer Press, Minn. Knight Ridder/Tribune Business News
Feb. 3--MELROSE, Minn. -- Dairy farmer Dennis Ritter knows that the potential closing of Fingerhut in St. Cloud is about to cause a crisis for health care and insurance in central Minnesota.
Losing your job and insurance benefits cause trouble for any worker who doesn't quickly slide into new employment and new benefits.
But an unknown number of the approximately 4,500 Fingerhut workers are farmers who often have difficulty finding work that supplements their farming activities, or finding work that keeps comparable family health benefits in place.
Ritter is one of 15 dairy farmers who advises the Stearns County Board of Commissioners on a variety of matters. He fears that hundreds of farm families will end up going without insurance.
'This looks like a disaster coming,' he said.
His group has been wrestling with availability and accessibility of health insurance for farmers and small-business people since July.
That was before several central Minnesota companies began scaling back and laying off people in response to the soft U.S. economy, and long before anyone imagined that Fingerhut would close its doors in St. Cloud.
Stearns County is Minnesota's largest dairy county, prompting the county government to sponsor a dairy advisory committee.
The county's 1,076 dairy farms generate $169 million of Stearns County's $320 million in annual farm income, offering good reasons why the county wants to support dairy farms, Ritter added.
The need for health insurance has caused farm families to turn to off-farm jobs all over the state to secure the benefits, a trend rapidly changing the appearance and size of farms in the Midwest.
But working off the farm isn't an easy option on labor-intensive dairy farmers, said Ritter. Up until the early '90s, he worked as a milk buyer for Kraft Foods in Melrose while he was also making farm mortgage payments.
He was relieved when the farm was paid off because he picked up $1,000 a month in disposable income. Ritter quickly sought independent insurance policies for the family, he said.
Within two years, though, half that money was gone as health insurance premiums shot up by $500 a month.
'Younger farmers and farms with higher costs just can't handle those premiums with cash flow from the farm, so they've had to take jobs with Fingerhut, Kraft and a few of the other big employers around here,' he said.
Ritter milks 50 cows daily from a herd of 66 cows. The first seven cows he milks each day are needed to pay his insurance premiums. Health insurance costs, which increased 35 percent for his family of four this past year, take the production from 3.5 of his cows.
'You can probably throw in another cow next year when I turn 55,' he said. 'My premium will take another bump.'
East of St. Cloud, near Princeton, Ken and Patty Valen face an even greater burden with insurance premiums on their dairy farm, which is about the same size as the Ritters.
The Valens have a family of six insured in their policy, which costs them $1,860 a month. That takes the milk from 10 cows a day, Patty Valen said, before money is set aside for food and household goods, livestock feed, utilities and taxes.
A daughter has spina bifida, which runs up the family's insurance premiums on what is not top-of-the-line insurance. It requires a $1,000 deductible payment.
Brad Burklund, a farm management specialist based at St. Cloud Technical College, said the Valens have little choice but to pay the high premiums.
Their dairy farm needs both partners. Why? Production costs would be even greater if one family member worked off the farm for insurance benefits, forcing the other to reduce the dairy herd or hire an employee.
Patty Valen, meanwhile, said either she or her husband would need to commute a good distance to an employer like Fingerhut to be part of a large enough insurance pool to lower their family's costs. 'A small shop around here couldn't afford us in their pool,' she said.
These are among insurance problems the Stearns County advisory group began looking at long before Federated said it would close Fingerhut if a buyer weren't found.
The study is now urgent, Ritter said. 'Losing insurance is no longer a threat. Now it's a serious problem.'
Fingerhut workers live all around St. Cloud, commuting more than 45 minutes to work in some cases. Some of these employees own small and mid-size farms whose farm income won't pay the premiums, said Jim Kastanek, a farm management consultant at Albany who has farm clients west and north of St. Cloud.
'I've got clients right now who are going without insurance because there isn't farm income to pay for it,' he said. 'If Fingerhut closes, we've got a terrible problem in central Minnesota.'
Farmers do not make a feasible pool by themselves to operate health care plans like those formed by employees at large companies.
Moreover, their insurance premiums are typically high because farming and coal mining are considered the most dangerous of the nation's major occupations.
What this means is that individual health insurance policy premiums are expensive for farm families -- far too expensive for some marginal income farms, Kastanek said.
He has seen his family's health insurance premiums increase from $271.92 a month in 1997 to $1,062 a month this year. This year's rate is a jump from $786 a month in 2001.
Ben Saukko, spokesman for Fingerhut at its headquarters in Minnetonka, said the company has no idea how many of its employees are farmers because there has not been a reason to ask. At the same time, he said, the number is thought to be 'substantial.'
'We're pretty sure it's more than double-digits, but we don't know if they count in the hundreds or more than a thousand,' said Mark Partridge, an economist at St. Cloud State University.
He and his wife, Jaime Partridge, a professor of management at nearby St. John's University in Collegeville, are trying to help the St. Cloud area understand the likely impact of Fingerhut's closing.
An impact model they use shows that an additional 1,100 jobs will be lost in the area if Fingerhut employment goes from 4,500 to zero, Partridge said. Further, the model projects that at least 10 percent of the secondary job losses will come from the health care industry, which is large and regionally centered in St. Cloud.
None of this should come as a surprise to business and public policy watchers.
The strong U.S. economy of the 1990s provided opportunities for farm families to secure insurance and other benefits that have become part of the compensation package for American corporate employees in the absence of broad-based national insurance plans found in most developed countries.
Minnesota has three state insurance plans to help people who are uninsurable, have prohibitively expensive pre-existing health conditions, and for those who have lost insurance coverage through failing businesses or unemployment.
But these risk pools can be pricey for farmers because their assets and income may look comparatively large on paper, even when it leaves little change rattling around in the kitchen cookie jar or family bank account.
Ritter said he doesn't know what his Stearns County advisory group might do or recommend, but he knows it will need to work with community groups and with state lawmakers. Hundreds of millions of dollars have been invested in Washington to derail health care reform efforts.
Closer to home, he said, 'People can see the need for insurance coverage.'
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(c) 2002, Saint Paul Pioneer Press, Minn. Distributed by Knight Ridder/Tribune Business News.