In the face of heavy health care cost increases, some small businesses are paying employees to turn down medical benefits, a compensation consulting firm reports.[@@]

A study by Salary.com, Needham, Mass., finds nearly 90% of businesses with up to 200-plus employees are paying more for basic medical insurance in 2005 than in 2004.

Of 304 companies surveyed, more than 50% reported annual increases of 10% to 20%, while almost 10% reported increases of 30% or more.

To cope, 64% are using such tactics as increasing copayments, raising employees’ share of premiums, switching plans, reducing the extent of coverage, tightening eligibility standards or even eliminating coverage altogether.

The survey found 14% offer employees incentives to decline medical plan coverage. Incentives typically offered include lump-sum pay increases, cash rebates and contributions to employee benefit accounts, Salary.com reports.

Only 1.7% of small employers are joining with other businesses to form health care buying cooperatives, the consultant found. At the same time, there was a significant increase in the number of small businesses willing to consider establishing or joining health care coalitions.

Employers with no more than 20 employees often offered the most generous medical benefits. Software.com found 32% offered fully paid coverage, compared to only 3% of companies with 200-plus employees.

On the other hand, 32% of the smallest employers required employees to pay 100% of all health care insurance premiums, while the largest small companies picked up an average of 62.5% of the cost.