More Small Companies Spurn Health Plans

November 20, 2007
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GRAND RAPIDS — A growing number of small employers are choosing to drop health coverage in the wake of ever-escalating premium costs, according to a recently released survey from a human resources consulting company.

The National Survey of Employer-Sponsored Health Plans from Mercer reported that 61 percent of U.S. employers with fewer than 200 employees offer health coverage, down from 63 percent over the year and down from 66 percent five years ago. Of those that do provide coverage, 22 percent exclude family plans.

The survey of 3,000 companies with at least 10 active employees across the country also revealed that West Michigan’s larger employers pay about 10 percent more than the national average for health benefit costs: $9,083 per employee compared to $8,229 across the U.S. The figure is based on survey results from companies that employ 500 or more, with 22 of them in West Michigan.

“That may be due to benefits that are greater or employee contributions are on average smaller … so the net cost is greater here than elsewhere,” said Greg Rhodes, Mercer principal in Grand Rapids. For example, the average employee contribution for individual preferred provider organization health coverage in West Michigan was $68 per month at the larger firms. Nationally, that figure was $89.

Overall, across the country employers reported a 6.1 percent average increase in health benefits costs for 2007, to an average $7,983 per worker.

“More of the employers surveyed in the West Michigan area were probably smaller, and their costs, along with their rates of increase, tended to be higher than some of the largest employers. It’s also due to the fact that the largest employers have done more aggressive things to help reduce costs over time.”

The survey shows that companies are shifting costs to workers, using health management programs and trying plans that feature health savings or health reimbursement accounts. Rhodes said those trends are more pronounced in larger companies.

“Smaller employers tend to lag behind what larger employers are doing,” Rhodes said. “An example of that: We saw a more aggressive pursuit of CDHPs with the larger employers first, then smaller employers started to get on the bandwagon.”

Availability of consumer-driven health plans increased in 2007, particularly among large employers, the Mercer survey showed. Some 14 percent of large employers offered CDHPs in 2007, up from 11 percent in 2006.

But among companies with fewer than 500 workers, just 7 percent included the CDHP option, although that was up from 5 percent in 2006. For 2008, 11 percent of those companies reported they would consider offering an CDHP.

Preferred provider organizations are the top choice at small and large companies, but workers at companies that have from 10 to 499 employees face higher PPO deductibles on average: $872 for individuals and $1,879 for families. That’s compared to an average $473 for individuals and $1,134 for families at companies that employ 500 or more.

In 2007, average deductibles grew 11 percent in 2007 for big companies, but just 2 percent for individuals and 5 percent for families at smaller companies.

The Mercer report noted that 5 percent of covered workers have CDHP plans, an increase from 3 percent, and PPOs have grown from 54 percent in 2003 to 61 percent in 2007.

Most of that market share has been drawn from HMO and POS plans. HMOs have fallen from 27 percent of covered employees in 2003 to 23 percent, while POS plans have gone from 14 percent to 8 percent over the same period.

PPOs are also more prevalent among Michigan employees with employer-provided health insurance, capturing 72 percent of the market, compared to 65 percent in the Midwest and 60 percent nationally. Sixteen percent in Michigan are enrolled in HMOs; 1 percent in POS plans; 3 percent in traditional indemnity; and 6 percent in CDHPs.

Health coverage for part-time workers in the growing service sector is mostly confined to large companies, the survey revealed. Part-time employees make up 42 percent of the wholesale/retail workforce, but just 38 percent of those companies offer them health coverage.

Mercer, a subsidiary of Marsh & McLellan Cos. Inc., surveyed 3,000 companies during the summer. The survey has an error range of plus or minus 3 percent.

COVERED EMPLOYEES BY TYPE OF HEALTH PLAN


PPO 

HMO 

POS 

INDEMNITY 

CDHP

MICHIGAN 

72% 

16% 

1% 

3%

6%

MIDWEST 

65%

21%

3%

2%

9%

U.S.

60%

26%

7%

1%

6%



Source: National Survey of Employer-Sponsored Health Plans 2007, Mercer

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