Nearly one in five small employers (19%) offering health insurance modified health benefits during 2002, according to a new survey by the Washington-based Employee Benefit Research Institute, which found that the changes often led to higher employee costs.

Of those employers that made a change, nearly two-thirds (65%) increased workers' co-payments or deductibles, 30% raised the percentage of premiums employees pay, and 29% cut back on the package of benefits offered. More than a third (35%) switched insurers.

Affordability a concern

More than a quarter of the group (26%) increased the scope of their health benefits. However, employers also reported that the cost of health benefits had affected their business in other ways. Some employers reported that they had reduced or eliminated pay raises or bonuses, reduced other employee benefits, or delayed investments.

Affordability for the employer and the worker is clearly a critical factor affecting the future changes to health benefit programs. Nearly a quarter of small employers think they would change coverage if premiums rose by 5% or more. Three percent said such an increase could cause them to drop health benefits entirely.

The survey also found that:

• Firms that offer coverage tend to pay more and have a larger percentage of full-time employees than those that do not. Firms not offering coverage employ a larger percentage of women, young people (under 30) and minorities.

• Employers offering coverage believe it impacts their business positively, but those not doing so do not identify any negative benefits of their decision.

"The cost pressures of rising health insurance make it likely that employees at small employers will continue to pay more for health insurance — if their employer offers the benefit at all," said EBRI President Dallas Salisbury. "This survey shows that those small employers that offer coverage are struggling to find ways to deal with this issue." PR