View 2007 Health Benefits Survey Report

Health insurance costs for New Jersey employers soared by an average of 11.3 percent to $7,561 per covered employee last year, NJBIA President Philip Kirschner said today in releasing the findings of the Association's 2007 Health Benefits Survey. 

This marked the fifth consecutive year in which actual or anticipated costs increased by more than 10 percent.  Given the effects of compounding, the total average cost has grown by 80 percent over the last five years.*

The survey found that fast-rising costs have taken a toll on the State’s smallest employers, those with 2-19 employees.  Growing numbers of small businesses are dropping coverage altogether because they can no longer afford it.

Eighty-two percent of businesses with 2-19 employees provided coverage in 2006, the survey found. This was down from 87 percent in 2004, and a high of 92 percent in 2003.  When those employers who no longer provide coverage were asked why, most said it was too costly.

“Health insurance costs are rising at more than three times the rate of inflation,” Kirschner said. “It’s clear that the pain of rising costs is hitting the smallest businesses the hardest, and this has forced some to drop coverage altogether.”

Even in the face of skyrocketing cost increases, however, the survey found that coverage has remained stable among larger employers.  Ninety-seven percent of businesses with 20 or more employees reported providing coverage in the 2007 survey, little changed from earlier surveys.

 “We are encouraged to find that coverage remains stable among businesses with 20 or more employees.  Even as their costs soar, they are making every effort to continue to provide health insurance as a benefit to their employees,” Kirschner added.

Kirschner presented the survey findings along with Christine Stearns, NJIBA vice president for health affairs. (View full report)

The average cost of $7,561 per employee included coverage of both full-time employees with no covered dependents and full-time employees with covered spouses and/or dependents.  This was the amount paid by the employer.  It did not include any share of premium costs paid by covered employees.

Among other survey findings:

• Costs rose faster for the smallest employers, a pattern consistent with earlier surveys.  In 2006, the average cost rose by 12 percent to $7,577 per employee for businesses with 2-19 employees.  Companies with 20 or more employees saw their costs rise by an average of slightly less than 10 percent.

• The 11.3 percent increase in 2006 followed an estimated increase of 12 percent in 2005 and an increase of 11 percent in 2004.  Factoring in increases of 13 percent and 15 percent in 2003 and 2002, respectively, the total average cost has grown by 80 percent over the last five years, given the effects of compounding.

• Looking ahead, respondents anticipate that costs will moderate somewhat in 2007.  Survey participants anticipate that the cost of health insurance will increase by an average of about 10 percent this year, less than the 2006 increase of 11.3 percent, but a double-digit rate of increase nonetheless.

• The average cost of $7,561 per employee in 2006 represented 13.4 percent of reported average wages of $56,318 per employee.

• A majority of respondents reported taking one or more of the following actions to control their healthcare costs in 2006. 

• Thirty-four percent of employers changed plans and 21 percent changed their insurance carriers.

• Thirty-two percent raised employee medical co-payments; 32 percent raised employees’ out-of-pocket deductibles, and 19 percent raised employees’ premium contributions.

• Finally, 18 percent limited wage and salary increases, 10 percent eliminated some types of medical coverage and 8 percent scaled back their hiring plans.

NJBIA’s 2007 Health Benefits Survey was mailed in early January 2007 to a random sample of the Association’s member companies employing two or more people.  The results are based on the first 1,148 valid responses from the target group of 9,837 businesses. 

* The 11.3 percent increase marked the fifth consecutive year of double-digit inflation as measured by this survey or as anticipated by its participants.  It followed an anticipated 12 percent increase in 2005[1] and an increase of 11 percent in 2004.  Factoring in increases of 13 percent and 15 percent recorded by the NJBIA survey in 2002 and 2003, an employer paying the average increase since 2002 would have seen their costs soar by a compound rate of increase of 80 percent over the last five years.