The cost of providing employee health benefits soared by 15% for New Jersey employers last year, the steepest one-year increase in at least a decade. See charts below.

Employers participating in NJBIA's 2003 Health Benefits Survey reported paying an average of $6,325 per covered employee for coverage in 2002, an increase of $823 or 15%.
This is the largest increase since the annual survey was first conducted in

When added to the average increase of 8.5% seen in each of the previous two years, the cost of providing employee health benefits has soared by a compound rate of 35 percent in just three years for employers participating in this survey.

"The 1,800 employers, most of them small companies, who participated in our survey tell us that health plan inflation accelerated sharply last year. This aggravates an already severe health insurance crisis," Executive Vice President Philip Kirschner said at a news conference today.

No immediate relief is in sight. Two-thirds of employers participating in the current survey said they expect their cost of health insurance to rise at double-digit rates again this year, with an average increase of 13.5% anticipated.

With more than 19,500 member companies throughout New Jersey, NJBIA is the nation's largest statewide employer association. The 2003 Health Benefits Survey was conducted inJanuary of this year. It was mailed to the Association's 16,400 member companies employing two or more people. The results are based on the first 1,830 responses. Respondents included companies of every size from every industry and region of the state. More than eight in ten respondents were small companies with 2-50 employees.

Few employers were spared sharp cost increases. Ninety-four percent of survey participants said their costs rose in 2002, and seven in ten said their costs rose by 10% or more. The survey also showed health costs remaining high as a proportion of wages and salaries paid. The average cost of $6,325 equaled 14% of reported average wages of $44,102.

The Association's annual Health Benefits Survey remains the largest statewide survey of the experiences and opinions of New Jersey employers in providing health insurance coverage to their employees. Among the survey's other findings:

• The smallest companies, those with 2-19 employees, paid the highest insurance rates and also saw the largest rate increases. Their average cost per employee was $6,489 in 2002, up 16% from the year before. This was $364 higher than average cost of $6,125 paid by all other companies combined.
• In the face of fast rising costs, health coverage remained stable among the employers responding to this survey. Ninety-five percent said they provided health coverage for full-time employees last year, up from 93% the year before. Seventy-four percent reported providing coverage for full-time employees and their dependents, unchanged.
• Only 3% of survey participants said they dropped health insurance coverage last year in response to rising costs: 2% of companies eliminated coverage for dependents of covered employees, while 1% dropped all coverage.
• A majority of employers responded to higher costs by requiring employees to pay more. Forty-eight percent increased employee co-payments, 39% increased employee deductibles, and 35% increased their employees' share of premium costs. Eight percent of companies reported reducing costs by eliminating coverage of some types of medical treatment.
• For a third consecutive year, managed care plans as a group failed to deliver cost savings to inflation-weary employers. Employers purchasing HMO plans paid an average of $5,865 per employee last year, 16% more than they paid for HMO coverage in 2001. Employers paid an average of $6,092 per employee for preferred provider plans (PPO), up 14%, and an average of $6,602 for point of service plans (POS), up 15%. For managed care plans as a group (HMO, PPO, and POS combined), employers paid an average of $6,183 per employee in 2002, a 15% increase.
• Fee-for-service plans, utilized by only 7 percent of respondents, cost an average of $7,684 per employee in 2002, up $1,101 or 17% from the year before.

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