New B21 Study: Why Companies Can't Just Increase Employee Contributions to Offset Rising Health-Benefits Costs

(PRWEB) November 11, 2005 -- A recent survey conducted by Business 21 Publishing revealed that HR executives don't see further hikes in employee contributions as the solution for skyrocketing health insurance costs.

Only 5 of 142 HR executives said that maintaining the status quo on employee contributions would cut too deeply into profits. Four in 10 said "it's only fair" that employees should pay a higher percentage of the total premium. But, surprisingly, 57% said that at present they did not intend to make employees pay more.

In the 1960s and 1970s, when companies commonly paid 100% of health benefits costs for their employees, free health benefits were perceived by many as an entitlement. In the late 1980s and early 1990s health premiums soared and many companies began asking employees to contribute 5% or 10% of the overall cost. Health benefits premiums leveled off in the late 1990s due to the positive impact of HMOs. But in the past few years they've accelerated again, to the point where some companies have threatened to eliminate health benefits altogether.

As the chart below shows, the average employee contribution to company health plans has increased significantly since 2000.

Year Avg. employ. Average out-of-

contribution pocket costs

2000 $662 $708

2001 $731 $689

2002 $877 $810

2003 $1,074 $980

2004 $1,284 $1,163

2005 $1,444 $1,366

2006* $1,612 $1,524

* — Source: Hewitt Associates

The B21 survey is surprising because, despite a 143% increase in employee contributions and a 115% increase in average out-of-pocket costs (co-pays, deductibles, etc.) since 2000, more than half of HR executives polled believe their companies are committed to holding the line on making employees dig deeper into their own pockets.

The reasons are both pragmatic and philosophical. While it's admirable for companies to guarantee low-cost health benefits, it also enhances the attractiveness of a company's benefits package and employees' perceptions of their "total compensation." In other words, it's an effective recruiting and retention tool.

Bottom line: The B21 survey might make you want to think twice about increasing the extent to which employees "share the burden" for rising health premiums.

To see detailed survey results and read entire article, go to http://www.b21pubs.com/hrintellcenter/Benefits/benefitsarticles/employee-contribution-to-health-benefits.asp

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