Small businesses use aggressive tactics to keep benefit costs down


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Small and mid-sized employers (10–999 workers) saw average health-benefit-premium increases of 9.2 percent last year. Marsh Inc. reports that these companies aggressively blunted the effects of fast-rising health care costs, using out-of-pocket cost-sharing options — such as replacing copayments for prescription-drug coverage with coinsurance — and by moving away from open-access-style plans and back to more-tightly controlled HMOs. The share of small and mid-sized employers offering HMOs jumped 15 percent last year, while participation in other types of benefit plans fell.

Higher copayments, yes, but payroll deductions? No!

One technique not heavily used by the smallest employers (3–199 workers) to minimize costs is making employees pay a portion of the monthly premium, according to a new Kaiser Family Foundation/Health Research and Educational Trust report. While intuitively it seems that smaller purchasers would want employees to bear some up-front costs of offering coverage, most do not (interestingly, recent published studies suggest that out-of-pocket cost-sharing strategies are more effective in controlling utilization than payroll deductions). In contrast, at larger companies, payroll deductions are a way of life.

SOURCE: EMPLOYER HEALTH BENEFITS 2001, KAISER FAMILY FOUNDATION AND HEALTH RESEARCH AND EDUCATIONAL TRUST

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