Employers Reviewing Healthcare Cost-Cutting Measures

October 19, 2001(PLANSPONSOR.com) - While many employers are reluctant to cut benefits, in the face of ever-increasing healthcare costs, a growing number plan to take steps to increase employee premiums, co-pays or deductibles - especially smaller employers, according to a new survey.

The NBCH Forum on Health asked human resources and benefits managers, and from coalition members what services or benefits have been reduced or eliminated over the last year.

Employers are generally absorbing a significant portion of these cost increases, however much of the increase has been passed on to employees in the form of higher premiums, deductibles and co-pays, in fact among companies with fewer than 1,000 employees,

  • half will pass on between 1% and 25% of the increase,
  • A little over a quarter will pass on between a quarter and half the increase,
  • Roughly 15% will bear all the costs, and
  • A mere 5% will pass on half or all of the cost increase

Results were similar at larger employers

Reluctance to Cut

Although most employers are reluctant to reduce any benefits, at companies with fewer than 1,000 employees,

  • almost all will cut emergency services,
  • close to 40% will cut pharmacy benefits, and
  • a little over a quarter will cut retiree benefits

On the flipside, fewer than 10% of these employers will cut:

  • out-of-area coverage,
  • preventive health services,
  • dental benefits,
  • disease management, and
  • mental health and substance abuse treatment

Results were similar at larger employers.

Cost Sharing Strategies

Rather than slash benefits, companies plan to implement the following strategies,

  • four-fifths of smaller employers will increase their employees’ premiums, compared to 88% of larger employers,
  • over three quarters of smaller employers will increase employee’s prescription co-payments, versus 79% of larger employers,
  • almost 70% of the former group will resort to tiered pharmacy offerings, compared to 76% of the latter group,
  • some 63% of the smaller employer group will increase the urgent care copayment, compared to 60% of the larger employer group, and
  • a little over 60% of the former group will increase the employee deductible, compared to 48% of the latter group

Respondents were asked whether providing healthcare benefits for their workforce is still worth the investment – for 60% it was. However, 20% favored a defined contribution framework, while a further 15% were willing to get out of the health care arena altogether and turn it over to the federal government.

Running Numbers

Among employers at companies with fewer than 1,000 employees,

  • a little over 15% report an increase of between zero and 20%,
  • almost half experienced increases of between 21% and 40%,
  • just over a quarter had cost increased of between 41% and 60%, and
  • only 8% reported increased of above 61%

Results at employers with more than 1,000 employees, showed that:

  • almost a third reported increased of under 20%
  • half saw cost increased of between 21% and 40%
  • some 16% saw increased of between 41% and 60%, and
  • a mere 2% saw increases of over 61%

Online Administration

When asked whether they use the Internet to administer benefits or to distribute healthcare information to their employees, results showed that:

  • where no small employees make use of the Internet to administer benefits, 3% of larger employees do,
  • one in five large employers uses the Web to distribute healthcare information, nearly identical to the 21% of smaller employers that do
  • only 9% of smaller companies use the medium for both purposes, compared to 16% of larger ones,
  • half the smaller employees polled don’t use the Internet for either purpose, compared to 20% of larger employers, and
  • just 17% of smaller employers say that they are reviewing the idea of online benefits administration and communication, compared with 41% of the those with more than 1,000 workers

Apples to Apples

The most important criteria used to compare the benefits offered in competing plans included cost elements such as deductibles, co-pay and cost sharing arrangements. Employee satisfaction was ranked second, followed by performance in major service categories.


The research, conducted by The HSM Group, a third-party consulting firm, comprises the responses of over 100 employers. The research was conducted by.

– Camilla Klein                             editors@plansponsor.com

The complete survey can be viewed at NBCH Web site at http://www.hsmgroup.com/nbch1/