EMPLOYEE BENEFITS

Small Businesses Providing Less Health Coverage

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August 23, 2005--Healthcare costs among companies with one to 200 workers have risen an average of 11.1% and now comprise 14.6% of employees' mean gross annual salary, according to a survey on basic medical coverage from Salary.com.

The survey also looked at ways in which companies were trying to contain costs. The most popular cost containment techniques among the firms surveyed included increasing employee share of premiums and increasing employee co-payments, with 27.6% intending to implement the former and 26.3% the latter. Another 26.3% intended to switch health plan types. Only 1.7% of the firms surveyed said they currently employed group purchasing options, another strategy for lowering healthcare costs.

While 66.5% of the firms said they split healthcare costs with employees, 22.8% bear the full cost of coverage and the last 10.7% shifted the cost entirely onto their workers. Companies with fewer than 25 employees tended to pay either all or none of the cost, and as companies get larger, they shift toward jointly funded plans, observed Richard Cellini, head of research at Salary.com.

Increasing employee contribution has been popular because it is "the most obvious strategy," according to Cellini.

However, as business-owners grow familiar with more sophisticated measures, such as fine-tuning eligibility requirements or giving employees incentives not to participate, Cellini expected these to gain on the strategy of increasing employee contributions.

The three most popular plans offered to employees by survey respondents were preferred providers, health maintenance organizations, and point of service, which varied in the flexibility offered to employees to visit out-of-network physicians.

The survey covered over 300 firms with between one and 200 employees, all clients of Salary.com, which specializes in providing compensation data, software and consulting services.

Last updated: Aug 23, 2005




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