Survey says mid-sized companies hit hardest by high health insurance costs

According to a national scientific survey on employer-sponsored health plans, mid-sized employers are hit harder with health insurance costs than multinational corporations or small companies.
Marsh Inc. and Mercer Human Resource Consulting, two operating companies of New York, N.Y.-based Marsh & McLennan Companies, Inc. collaborated to conduct the survey, which was released July 12 and reviewed data from 2003.
Susan Rabe, assistant vice president of the Marsh office in Milwaukee, said the study has identified a trend for the past couple of years in which mid-sized employers, defined as employing 10 to 1,999 workers, have higher health insurance costs.
"I was not surprised by the 2003 survey results," Rabe said. "The mid-sized employers have been hit the worst in the last five to 10 years, and costs have been escalating. We are seeing that more mid-sized employers are shifting costs across the board than the larger employers."
The national overview of survey results found that, for mid-sized employers, the average per-employee annual health insurance cost, including medical, dental and any other freestanding health plan costs, was $6,130. That is about a 9 percent increase from the 2002 survey results, in which the average per-employee cost was $5,583.
According to the survey, which was based on 1,904 mid-sized employer respondents, the average cost per-employee varies by employer size and by industry.
The smallest employer size within the mid-sized employer grouping was 10 to 49 employees and had an average per-employee health insurance cost of $5,795. Those with 1,000 to 1,999 employees had an average per-employee cost of $6,472.
The wholesale/retail industry was found to have the lowest average per-employee cost of $5,478. The highest average per-employee cost was $6,812 for public sector employers.
"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," Rabe said. "Yet they often do not have the purchasing power of large employers, nor do they benefit from the same economies of scale. The smallest employers, on the other hand, are keeping costs down by discouraging coverage of dependents and imposing high deductibles."
The report also broke down the results geographically. Wisconsin is part of the North Central region of the study. The region also includes Missouri, Kansas, Ohio, Michigan, Illinois, Indiana, Minnesota, North Dakota, South Dakota, Nebraska and Iowa.
According to the survey, 595 North Central employers participated with an average of 563 employees.
The survey reported that 47 percent of North Central employers offer coverage to part-time employees and that the dominant type of medical plan has been a preferred provider organization (PPO).
The average total health benefit cost per employee, which includes medical, dental, and other health plans, increased about 10 percent to $6,999 in 2003 from $6,355 in 2002.
Costs were highest among employers with 200 to 499 employees, averaging $7,655 per employee. Those with 1,000 to 1,999 employees had an average per-employee cost of $6,797.
"Employers need to accelerate emerging market forces that have demonstrated the power to slow cost: consumerism, wellness, disease management, better claim analytics and stronger performance standards," Michael Turpin, chairman of benefits for Marsh, stated in the survey. "Some small and mid-sized firms may choose to outsource more responsibility to third-party experts."
The survey is sent to employers annually in the summer, and Mercer and Marsh spend the remainder of the year collecting data, according to Rabe.
"The survey is in-depth," Rabe said. "We ask for information on the types of plans employers offer, enrollment, if there is a mix of plans or if the employer strictly offers POS (point-of-service) or HMO (health maintenance organizations), if there are benefits for active employees and coverage for retirees, the contribution amount per benefit plan, etc."
A copy of the report may be obtained by contacting Rabe at (414) 290-4771.
August 6, 2004, Small Business Times, Milwaukee, WI