Taking it hard Featured

10:27am EDT August 30, 2002
 

Mid-sized employers were hardest hit by last year's double-digit health benefit cost increases, according to an analysis released by Marsh Inc.

Across the country, employers with 200 to 999 employees absorbed a 17 percent increase in total health benefit costs, which reached $5,144 per employee -- an average surpassed only by employers with 20,000 or more employees. Small employers (10 to 199 employees) kept their average cost increase down to 10 percent by slashing benefits, while those with 1,000 or more workers -- helped by their size and sophisticated cost management tools -- reported an average increase of 12 percent.

Drawn from a national, scientific survey conducted by Mercer Human Resource Consulting, the survey "Mid-sized Employer Health Plans 2001" is based on responses from 1,352 employers with 10 to 999 employees.

In the Mid-Atlantic Region, which includes Pennsylvania, New York, and New Jersey, mid-sized employers participating in the study saw their costs rise 10.4 percent to reach an average of $6,120. This includes costs for medical, dental and any other freestanding health plan offered. These employers expected their costs to increase 11.6 percent in 2002.

At the local level, employers in Pennsylvania, and specifically Western Pennsylvania, saw their costs rise at a slightly slower pace to reach an average of $5,216 per employee.

"Mid-sized employers are in a double bind," said Beth Essey, practice leader for employee benefit services of the Marsh office in Pittsburgh. "They need to offer a benefit package that is comparable to those offered by large employers, with whom they compete for labor, yet they have neither the purchasing power of large employers nor the resources to devote to benefit cost management."

The nation's small employers are coping with cost increases by cutting benefits. In the most common type of medical plan, the PPO, the median deductible amount jumped from $250 to $500 in 2001 -- and that's for employees using the preferred provider network.

Even more telling, the number of small employers requiring a deductible of $1,000 or more is approaching one in five. Deductibles of this size are rare among mid-sized employers -- fewer than one in 10 among those with 200 to 999 employees.

Says Essey: "The message is pretty clear -- for some small employers, the choice is to shift cost to employees or terminate the plan." How to reach: MMC, www.mmc.com. Marsh, www.marsh.com