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"Smaller the Company, More They Pay for Health Insurance"
"MINNEAPOLIS -- The nation's small- and mid-sized employers cut benefits in their health plans in 2003, holding the cost increase to 9.8% among employers with fewer than 2,000 workers. According to a survey report released today by Marsh Inc., which analyzes data from 1,904 such employers, the total cost of health benefits (medical, dental, and any other health plans offered) averaged $6,130 per employee in 2003.The smallest employers generally are keeping costs down by discouraging coverage of dependents and imposing high deductibles, the data found. Among employers with fewer than 50 employees, cost averaged just $5,795 per employee. But mid-sized employers (1,000 to 1,999 employees) experienced an average cost of $6,472 -- more than all larger employers ($6,324).The study is drawn from a national, scientific survey conducted by Mercer Human Resource Consulting. Both Marsh and Mercer are operating companies of Marsh & McLennan Companies,Inc. (MMC).Among mid-sized employers included in the survey in the North Central region of the U.S., employee health care costs per employee rose 10.1% to reach $6,999. The region includes: Ohio, Michigan, Illinois, Indiana, Minnesota, North Dakota, South Dakota, Nebraska, Iowa, Wisconsin, Kansas, and Missouri."The dilemma for mid-sized employers is that they must compete with the largest employers for labor, and thus must offer a comparable benefit package. Yet they often do not have the purchasing power of large employers, nor do they benefit from the same economies of scale," said Judye Fawver, vice president, employee benefits, at Marsh's office in Minneapolis.According to the report, employers with 10 to 49 employees required employees to pay, on average, 64% of the preferred provider organization (PPO) premium for family coverage. Just 44% of their employees elected family coverage. Employers with 1,000 to 1,999 employees required a family contribution of just 30%, and, not surprisingly, a far greater percentage of their employees elected it (57%).Although the slowdown in benefit cost increases in 2003 was welcome, it does not signal a cooling of the underlying cost trend; rather, it was the results of employer cost-cutting measures, the report found. For example, the percentage of employers requiring a PPO in-network deductible of $1,000 or more jumped from 22% to 34%, while the percentage requiring an HMO physician office co-pay of $20 or more nearly doubled, rising from 18% to 34%.The smallest employers have been the first to shift cost, but survey results suggest that in 2004 the larger ones will follow suit. Nearly half (46%) of the surveyed employers with 1,000 to 1,999 employees said they would raise employee contribution percentages in 2004, and 43% said they would shift more cost to employees by raising deductibles, copayments/coinsurance, or out- of-pocket maximums. These figures are both nearly double the percentage of smaller employers planning to shift more cost to employees.Overall, the surveyed employers expect health care costs to increase 13.9% in 2004. The smallest among them expect an increase of 15.2%.Among mid-sized employers offering prescription drug card plans, the use of three-tiered copayments -- increasing copay amounts for generic, preferred brand, and nonpreferred brand-name drugs -- reached 50% in 2003. The copayment amounts in card plans averaged $11 for a generic drug, $22 for a preferred brand-name drug, and $38 for a nonpreferred brand-name drug.Well over half (57%) of the employers with fewer than 2,000 employees offered a preferred provider organization (PPO) in 2003, and 59% of all their covered employees enrolled in one. Health maintenance organizations (HMOs) were offered by 32% of employers and point-of-service (POS) plans by 21%. Just 8% of employers offered a traditional indemnity plan.Employers preferred PPOs despite higher cost: PPO cost averaged $5,828 per employee while HMO cost averaged $5,029. However, HMO cost rose faster, by 14.2%, while PPO cost rose just 8.9%.Visit Marsh Inc. at www.marsh.com "