Kibble & Prentice Releases Findings of Annual Employer Survey

July 15, 2004

Seattle-based Kibble & Prentice recently announced the results of its annual employee benefits survey. With nearly 200 Washington state companies reporting, the results showed three clear trends: health care costs continue to increase and employers have responded by decreasing some benefits and shifting some benefits costs to employees. The full report is available on request via Kibble & Prentice’s Web site at www.kpcom.com.

Rate increases:

Washington state companies continued to struggle last year with medical premium increases. Almost 30 percent (28.0) received premium increases of between 11 and 15 percent. Thirty percent experienced increases between 16 and 30 percent. Rate increases were smaller for dental and vision coverage.

Cost as percentage of payroll:

In 2003, 12 percent of employers saw cost of benefits as a percentage of payroll of between 11 and 15 percent; this year that number jumped to 21.5 percent. In 2003, 13 percent saw costs between 16 and 20 percent; this year that number was 19.3 percent. In 2003, 22 percent saw costs as a percentage of payroll between 26 and 30 percent — that number stayed the same this year.

Cost transfer:

Employers responded by transferring a portion of these increases to employees. 53.7 percent of employers increased deductibles for plans, up from 32 percent last year. Thirty percent increased office visit co-pays and prescription drug co-pays. Thirty percent increased employee coinsurance or out of pocket maximums.

This cost-shifting will continue next year. More than a third (35.4 percent) of employers say they will increase deductibles, a significant increase over last year’s 23 percent. More than a quarter, (28 percent) indicate they will increase prescription drug co-pays and almost 20 percent (19.5 percent) will increase employee co-insurance.

Some decreases in benefits programs:

In addition to shifting the cost to employees, this survey reported a 10 percent decrease in employers who provide term life insurance as well as short term disability. There was a 13 percent decrease (from 84 to 71 percent) in employers who offer Long Term Disability coverage and nearly a 10 percent decrease in employers offering 401k plans.

In addition, the number of employers who match employee contributions in a 401k plan decreased by 5 percent; the number that contribute to plans based on profits also decreased by 5 percent, and the percentage of employers who don’t make any contribution at all increased by 6 percent. Interestingly, the percentage of employers that contribute both a match and profit sharing increased slightly (3.3 percent).

Some increases in benefits programs:

Despite the results above, employers did increase some benefits and perks. In an effort to combat rising healthcare costs, 22 percent of employers offered some form of wellness plans. For example, the percentage of respondents who offer gym memberships increased from 23 to 36 percent. The percentage nearly doubled for bus passes, from 30 to 58 percent. Parking subsidies also increased, from 24 to 33.8 percent. Also of interest, now almost 60 percent of employers (57.2 percent) offer coverage for Domestic Partners, up from 49 percent last year.

Strategy — Healthcare Savings Accounts:

Nearly 40 percent of respondents have implemented (9 percent) or plan to implement (31 percent) a HSA plan in 2004 or 2005, while more than 30 percent (31.1 percent) say they won’t. Almost 30 percent (27.2 percent) feel they need more information before deciding.

“These findings won’t be a surprise to most business owners in our state,” said Dale Cowles, president of Kibble & Prentice. “For years, they have been struggling to create balanced and rewarding benefit programs without having to raise their prices or sacrifice so much of their bottom line they endanger their business. Frankly, given the environment we have had, I think on the whole they have done a great job. In the future, Consumer Driven Healthcare Plans such as HSA’s and HRA’s are going to give both employers and employees more tools to better manage costs.”

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