The 11 percent increase marked the third consecutive year of double-digit inflation as measured by the Association’s annual survey of New Jersey employers. It followed a 13 percent increase in 2003 and a 15 percent increase in 2002. Over the last three years, participants in the NJBIA Health Benefits Survey have seen their health plan costs rise by an average of 13 percent annually. This is more than four times the rate of consumer inflation for the same period, which averaged 3 percent annually in the New York/New Jersey region. (See Chart 1.)

Looking ahead, survey participants said they expect their costs to rise by an average of 12 percent in 2005. In response to exploding costs, fewer employers provided coverage in 2004, the first such decline in the survey’s 12-year history.

"Years of relentless price increases have pushed the price of health insurance beyond the reach of many small companies. Now they are dropping coverage because they simply can’t afford it. This is an alarming trend," NJBIA President Philip Kirschner said during the press conference.

Survey participants paid an average of $7,307 per covered employee to provide health insurance in 2004, up $735 or 11 percent from the year before. The average cost of $7,307 per employee equaled 16 percent of reported average wages, also a record. This was the amount paid by the employer. It did not include any share of premium costs paid by covered employees.

For the first time in the survey’s 12-year history, the number of employers providing health coverage declined. Ninety percent of survey participants said they provided coverage for full-time employees in 2004, down from 94 percent the year before. Eighty-seven percent of small companies (2-19 employees) provided coverage, down from 92 percent. (See Table 2.)

The survey found that employers are aggressively trying to control their health- care costs by shopping around for new plans, offering less comprehensive coverage, requiring their employees to share in the growing cost, and in the case of larger companies, negotiating better deals. Employers frequently reported taking more than one of these actions.

Seventy-three percent of survey participants who reported taking cost control actions required employees to pay an increased share of those costs, either through higher deductibles or co-payments or by paying a larger share of the premium.

Among other survey findings:

NJBIA urged State government leaders to make controlling the cost of health insurance a top legislative priority. NJBIA has proposed a comprehensive health insurance reform plan that would:

About the Survey

NJBIA’s Health Benefits Survey was mailed in January 2005 to the Association’s approximately 20,000 member companies employing two or more people. The results are based on the first 1,563 valid responses.

As a group, the respondents generally reflect the Association’s membership profile. They represent every industry in every region of the State.

The survey participants came from all 21 New Jersey counties. The vast majority were small companies employing less than 50 people. Sixty-seven percent had 2-19 employees; 19 percent, 20-50 employees; and 14 percent, more than 50 employees. Twenty-one percent were in manufacturing, 18 percent in wholesale and retail trade, and 10 percent in construction. Most of the remaining respondents were in various service industries.