Small Businesses Forecast Health-Care Cost Shift

October 7, 2003 (PLANSPONSOR.com) - Small businesses, loaded down with increasing health-care costs, are strongly leaning towards shifting new or additional costs to their employees.

Currently, 56% of the small businesses polled contribute half or more of their employees’ health care costs, with 32.3% providing all or almost all of the premiums. However, 60% fingered health-care costs as a “major problem” and are planning to significantly change their employee medical program in 2004, according to Small Business Digest’s Fall Survey.

In fact, companies with fewer than 25 employees and who provided health-care coverage reported costs averaged 14.2% of their pre-tax expenses. For all 2,000 firms in the poll, that total jumped to 15.6%.

Conversely, one of every three companies (33.8%) did not provide coverage of any sort. However, 5% of these companies indicated they were planning to do so next year.

The forecast for increased employee contributions came from comments attached to the survey, with some of the sample passing along any fee increases to employees, switching providers, and/or reducing co-pay schedules to keep health costs from going higher.

Quantifiable data though painted a different picture. Of those planning a change, only one in four companies (24.4%) in this same group indicated they would increase their contributions when policies renewed and 37.4% said they expected to decrease contributions. Also, 5.8% of companies planning a change said they intended to use a state or government plan for their health-care costs. While only a small number of respondents came from California – which just enacted a new program for a state-sponsored pool program – respondents spoke of government programs from throughout the country.

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