Rising Health Premiums Squeeze Benefits At Small Employers

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Nineteen percent of small employers that offer health insurance changed their health benefits in 2002, according to a new survey co-sponsored by the Employee Benefit Research Institute, Washington.

Twenty-six percent of the small employers increased the scope of their health coverage. But 65% increased workers co-payments or deductibles, 35% switched carriers, 30% raised the employees share of the premiums and 29% cut back on the package of benefits offered.

Some employers told researchers they have coped with rising health coverage costs by reducing or eliminating pay raises or bonuses, reducing other employee benefits or delaying investments.

But the news is not all bad for the agents selling the health coverage, says EBRIs Paul Fronstin, who wrote a survey report that appears in the January EBRI Issue Brief.

“If youre an agent, it may be easier to make the sale because the employer has more options than previously thought,” Fronstin says.

“The thinking is not linear,” Fronstin says. “Its multi-dimensional. Its not just, Premiums are going up, so lets shift the cost to workers. Its more like, Where can we get the money to pay?”

Researchers also interviewed small employers that do not provide health coverage. One-third of these employers say they are extremely or very likely to add health benefits in the next two years.

The small firms that are not offering coverage tend to pay less and have more part-time employees than firms offering coverage. The firms without coverage also tend to employ more women, more workers under 30 and more members of minority groups.

EBRI sponsored the survey, the 2002 Small Employer Health Benefits Survey, with the Blue Cross and Blue Shield Association, Chicago.


Reproduced from National Underwriter Edition, February 10, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.