September 2007
Employers try to cope
Employers have been doing their best to continue to provide insurance, but they have been struggling in the past five years
or so as insurance premiums have risen three times as fast as inflation.
In 2000, U.S. employers spent $331 billion altogether on group health insurance--about 7 percent of what they spent overall on wages and salaries, according to a survey by the Employee Benefit Research Institute. By 2005, health insurance was costing employers $514 billion--about 9 percent of their total spending on wages and salaries. Employers haven't been asking employees to pay a bigger share of the premiums than they used to, but employees' costs have gone up anyway because premiums have risen so much. In 2000 the average employee contribution for family coverage was $135 per month; in 2006 it was $248.
Small companies have felt the pressure most keenly because they have fewer employees over which to spread medical risk and therefore must pay more to get the same coverage.
Raymond Arth, president of a small manufacturing company in Avon Lake, Ohio, says he has steadily modified his company's health benefits to keep premiums affordable for his 35 employees. One optional plan he offered once covered drugs and doctors with only a $5 co-pay, but now some employees spend about $1,500 of their own money before coverage kicks in. Even so, Arth must now raise the deductible again to avoid an 18 percent premium increase. "In the past few years, the cost of health insurance has prevented me from giving my employees hourly raises," he says. "But I have employees with health conditions who I know couldn't find coverage in the individual market."
Insurance is also more problematic for lower-paid workers because premiums and co-pays usually cost the same for everyone, regardless of income. "If insurance is $10,000 a year for a family, and you're paying your employee $50,000, health insurance is adding 20 percent to your costs," Anderson says. "And many low-income workers would rather eat than have health insurance."
In 2000, U.S. employers spent $331 billion altogether on group health insurance--about 7 percent of what they spent overall on wages and salaries, according to a survey by the Employee Benefit Research Institute. By 2005, health insurance was costing employers $514 billion--about 9 percent of their total spending on wages and salaries. Employers haven't been asking employees to pay a bigger share of the premiums than they used to, but employees' costs have gone up anyway because premiums have risen so much. In 2000 the average employee contribution for family coverage was $135 per month; in 2006 it was $248.
Small companies have felt the pressure most keenly because they have fewer employees over which to spread medical risk and therefore must pay more to get the same coverage.
Raymond Arth, president of a small manufacturing company in Avon Lake, Ohio, says he has steadily modified his company's health benefits to keep premiums affordable for his 35 employees. One optional plan he offered once covered drugs and doctors with only a $5 co-pay, but now some employees spend about $1,500 of their own money before coverage kicks in. Even so, Arth must now raise the deductible again to avoid an 18 percent premium increase. "In the past few years, the cost of health insurance has prevented me from giving my employees hourly raises," he says. "But I have employees with health conditions who I know couldn't find coverage in the individual market."
Insurance is also more problematic for lower-paid workers because premiums and co-pays usually cost the same for everyone, regardless of income. "If insurance is $10,000 a year for a family, and you're paying your employee $50,000, health insurance is adding 20 percent to your costs," Anderson says. "And many low-income workers would rather eat than have health insurance."
