Study: Health Cost Increases Hit Small Employers Hardest

Small firms with three to 199 employees experienced annual premium increases of 15.5% from 2002 to 2003, while firms with 200 or more employees got away with a 13.2% hike, a ccording to a report set for release by the Commonwealth Fund.

The spread was even wider when it came to health plan deductibles. From 2000 to 2003, deductibles among small firms doubled in preferred provider organization (PPO) plans when employees used in-network providers and increased 131% when they used out-of-network providers, the report said. Big employers had a 33% hike for deductibles in PPO plans when employees stayed in-network and 44% when they went outside.

The report said large firms tend to provide broader health coverage than their smaller counterparts. For example, 87% of workers in large firms are offered dental coverage, while only 57% of small-company workers had the same coverage.

Jon Gabel, one of the researchers who wrote the report, said small firms face higher administrative costs, have fewer lives over which to spread the risk of catastrophic costs, and don’t have the purchasing clout of large firms when they negotiate rates with insurers. Gabel and Jeremy Pickreign, both with the Health Research and Educational Trust, collaborated on the report.

The report’s data in the report came from The Kaiser/HRET Survey of Employer-Sponsored Health Benefits, an annual survey of employer-based health plans. It is based on information from 1989, 1996, 2001, and 2003. A report summary is at

http://www.cmwf.org/programs/insurance/gabel_riskybusiness_ib_722.pdf .