Health insurance costs exploded in 2003 by an average of 13% for New Jersey employers. This spike came on top of a 15% increase in 2002. And employers expect to get hit with double-digit cost increases again in 2004, NJBIA President Philip Kirschner said today in releasing the findings of the Association's 2004 Health Benefits Survey.

Respondents to the survey reported paying an average of $6,692 per covered employee for their policies in 2003, up $781 or 13% from the year before. This was among the major findings of the 2004 Health Benefits Survey, which was conducted in January. More than 1,500 mostly small companies participated in the survey.

Over the last four years, survey participants have seen their health insurance costs soar by 53% overall. This has hiked their costs by a compound annual rate of 13%, well above the equivalent rate of general inflation, which has been less than 3%.

"Exploding health insurance costs are putting a tremendous financial burden on employers and employees alike," Kirschner said in a news conference at the NJBIA headquarters on West State Street. "The cost of an average policy is fast approaching $7,000 per covered employee."

Prevented by competition from raising prices for their own products and services, employers have responded by working aggressively to lower their health plan costs. They have shopped around for better deals, changed plans or carriers, cut back on medical services covered, and required their employees to share more of the cost.

Seventy-two percent of employers who took steps to control costs last year did so by requiring covered employees to pay higher deductibles, co-payments and premium costs, the survey found.

Even after taking aggressive cost-control actions, however, most employers saw their own costs rise by double-digit rates of increase in 2002 and 2003. A majority of survey participants, 65%, saw costs rise by 10% or more in 2003. This compares with 69% who saw double-digit increases the year before.

Health plan costs are also rising as a percentage of employee wages and salaries. The average cost per employee at $6,692 in 2003 represented 15% of reported average wages of $43,940, up from 14% of wages in 2002 and 11% five years ago.

In spite of sharply rising costs, coverage has remained stable among the group of employers responding to this survey. Ninety-four percent provided coverage for full-time workers and 75% for full-time workers and their dependents. As measured by the NJBIA survey, these coverage levels have remained virtually unchanged for five years.

The average per-employee cost of $6,692 includes coverage of both full-time employees with no dependents and full-time employees with covered dependents. This is the amount paid by the employer. It does not include any share of premium costs paid by covered employees.

Many survey participants paid significantly more than the average, however. Eleven percent of survey participants paid $7,000-$8,000 per employee, 18% paid $8,000 to $10,000, and 12% paid $10,000 or more.

The smallest companies continue to pay the highest costs. Companies with 2-19 employees saw their average cost rise by $816 to $6,797 last year, an increase of 14%.

Among the plan types, health maintenance organizations (HMOs) remained the low-cost leaders. The average cost of an HMO plan rose by $638 to $6,249 per employee. The next-lowest-cost plan, point of service (POS), rose by $733 to $6,713, followed by preferred provider, which rose by $910 to $7,197.

Looking ahead, survey participants expect their costs to rise by an average of 11% this year. If these expectations are realized, 2004 will be the third consecutive year in which the cost of providing health benefits will have risen at a double-digit pace.

Looking at the details of inflation expectations, about half (52%) of respondents expect their health plan costs to rise by 10% or more this year, down from a high of 64% having this expectation in the 2003 survey.