Benefit Cuts Help Employers Rein In Health Care Costs

The smallest employers generally kept double-digit cost increases at bay by such tactics as discouraging coverage of dependents and imposing high deductibles, Marsh says.

“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,” says Judye Fawver, vice president of employee benefits for Marsh. “Yet they often do not have the purchasing power of large employers, nor do they benefit from the same economies of scale.”

Marsh found that employers with 10 to 49 employees required employees to pay an average of 64% of the paid provider organization premium for family coverage. For that reason, just 44% of their employees elected family coverage. Among employers with 1,000 to 1,999 employees, the average family contribution was just 30%, and 57% of their employees elected it.

The percentage of employers requiring a PPO in-network deductible of $1,000 or more jumped from 22% in 2002 to 34% in 2003, while the percentage requiring an HMO physician office copay of $20 or more nearly doubled, from 18% to 34%, Marsh says.