Double-Digit Health Cost Increases Continue in N.Y.

September 1, 2004

For the fourth year in a row, a significant majority of employers in New York State were hit with double-digit increases in health-insurance premiums this year, and employers continue the struggle to minimize the damage this trend does to their competitiveness, according to The Business Council of New York’s latest annual survey of employers’ compensation practices.

More than 70 percent of responding employers reported an increase in their premium costs for 2004; the average increase reported was 13.4 percent. In contrast, the state’s projected inflation rate for 2004 is 2.1 percent, according to the state Division of the Budget.

This increase in costs continues a trend of many years. In 2001, 2002, and 2003, the same annual survey showed at least 70 percent of respondents reporting increases in their health-insurance premiums, with the average increase in each of those years at least 13 percent.

The Council’s annual survey of New York State employers’ compensation practices was conducted by Compdata Surveys of Kansas City, the survey company with the nation’s largest database on pay and benefits information. The results of the survey were published in Compensation Data New York 2004, a 566-page book compiling the results of the survey of New York State employers’ pay and benefits practices.

“Employers and employees alike are exceedingly aware of the effects of rising healthcare costs,” said Theresa Worman, director of business development for Compdata Surveys. “To cope with these increasing costs and remain competitive, employers are mixing new ideas with more common cost-reduction measures.”

Worman said employers again this year reported taking a variety of steps to ease the burden of these cost increases:

* Nearly one in four employers (39 percent) increased the employee portion of the health-care premium. In each of the last three years, more than a third of New York State
employers have taken this step.

* Another 11 percent reduced the amount of benefits offered. Many employers simultaneously began offering employers more voluntary benefit options that workers may choose to pay for themselves.

* The vast majority of employers (84 percent) reported offering workers a flexible spending account (FSA), an account to which employers may contribute pre-tax dollars that can be used to pay health-care costs. Workers have been generally reluctant to use FSAs for fear they would lose contributions they did not spend in the same year. But an IRS ruling effective last January allows reimbursements for a broader range of health-care costs, including many over-the-counter medications. This has made FSAs more attractive to workers, Worman said.

The survey showed employers taking the following steps to ease the burden of increasing health-insurance costs:
Employer action

Percentage of employers taking each step

Increased employee portion of health-insurance premiums 39 %
Switched insurance companies 19 %
Implemented a managed-care program for the first time 5 %
Increased deductible levels 30 %
Offered a choice of deductible levels 19 %
Increased employee co-insurance levels 24 %

The survey also showed that New York State employers in 2004 spent 19 percent of their total payroll dollars on voluntary benefits as folows:

Percentage of payroll dollars spent on this benefit
Health insurance 9.2 %
Pension 4.4 %
Other non-mandated benefits 2.7 %
Dental coverage 1.2 %
Disability 0.9 %
Life insurance 0.8 %

Was this article valuable?

Here are more articles you may enjoy.