Human Capital & Careers

Businesses Slashing Medical Benefits

Most employers plan to pass some cost hikes on to workers, survey finds. And many small businesses are considering dropping coverage entirely.
Stephen TaubMarch 18, 2003

In case you’re still not convinced that health care is the next great corporate crisis, read on.

According to a nationwide survey of 600 large and small businesses, 92 percent say they are likely to increase the amount their employees pay for health-insurance premiums next year.

The study was part of a report for Cover the Uninsured Week, and was released by several business and labor groups and The Robert Wood Johnson Foundation.

The survey found that companies of all sizes expect health-insurance costs to jump an additional 18 percent during the next year. This comes on top of the mid-teens growth forecasts in most surveys these days.

Meanwhile, more than 70 percent of employers say the number of uninsured will grow in the next decade. This is bad news, given that 41 million people were without health-care insurance for all of 2001. That’s an increase of 1.4 million from the previous year, according to the most recent census figures. The rise in the number of uninsured was the largest one-year increase in nearly a decade.

The survey also found that for this year (and the next five years), employees will be expected to pay more of their health-insurance premiums, as well as larger deductibles and co-pays.

This does not mean workers will get stuck paying the entire bill, however. Companies in the survey expect to bear the bulk of the anticipated spikes in health-insurance premiums. The respondents said their companies will pass on just one quarter of the rising expenses to employees.

Other survey findings:

  • To cope with surging health-insurance premiums, 45 percent of employers say they will reduce employee health benefits during the next five years.
  • Just 4 percent of businesses say they are likely to drop employee health-care coverage entirely next year. But if faced with rising costs for the next five years, businesses are increasingly likely to drop coverage, particularly small business that have fewer than 50 employees.
  • If faced with cost hikes for the next five years, one in seven of the small businesses that currently offer insurance to employees say they would likely drop coverage entirely.
  • These small employers said they expect an average premium increase of about 20 percent per year for the next five years.