Proudly Sponsored By these Premium PEO’s

PEO Blog

Learn More About the PEO Industry

NAPEO Survey;Group Health a Challenge for Small Businesses

Friday July 25, 2008

To relieve the pain, more and more companies are passing at least some of the increases on to workers. Some smaller companies are scrapping their insurance programs entirely; new companies are often reluctant to offer health benefits at all. As a result, every year, more Americans face the terrible risk of going without health insurance. There are now 47 million uninsured people in this country, many of them children. Business groups across the spectrum are calling for change. NAPEO believes one way to force reform is to document the impact of the health-care crisis on its clients, America’s small businesses. In late 2006, NAPEO began taking the pulse of its members’ small-business clients every quarter. The first survey, fittingly, concerned health care. The follow-up November 2007 survey on health care demonstrates continued discontent with the status quo. A sampling of the 2007 survey’s findings follows: [For the complete survey, go to]

Q. To what extent have your costs for employee health insurance increased or decreased in 2007?

A. About half the companies said health insurance costs as much as 10 percent more, although these figures can be all over the map depending on the region, the kind of company, and other variables. Premiums continued to rise faster than workers’ paychecks, which grew less than four percent on average, or inflation, which was less than three percent.

Q. If your costs increased in 2007, how did this year’s increase compare to 2006’s increase?

A. Almost 40 percent said premiums rose about the same as last year. A survey by the Kaiser Family Foundation found the increase dropped to six percent from last year’s 7.7 percent. That sounds encouraging, but it’s only part of the story. Many experts say the cost of doctors, hospitals, and drugs is still soaring. The modest decrease in the rising price of insurance premiums means only that companies have cut benefits and shifted more costs onto employees through higher deductibles and co-payments. Insurance companies, meanwhile, attribute the decline to controlling costs better by using more generic drugs.

Q. Will you require employees to contribute more to health coverage in 2008?

A. Seventy percent said they wouldn’t require employees to pony up more. But most of the rest said they would, a few by as much as 11 percent or more. That’s a little worse for workers than in 2006, when 75 percent of the businesses NAPEO surveyed said they wouldn’t raise employees’ share of premiums.

Q. Will you raise costs such as co-payments for office visits and drugs, or for deductibles?

A. Four-fifths of the companies said they would not do this in 2008.

Q. Will you continue providing a health plan for employees in 2008?

A. Seventy-one percent said they would definitely continue to offer health benefits. A little ominously, though, 20 percent said it was “likely” but not definite. It wouldn’t be unusual for at least some to drop coverage—16 percent of Americans, or more than one in six, according to the federal Census Bureau, go without health insurance now.

Q. Approximately what percentage of companies in your industry offer health benefits?

A. Only 40 percent of the companies estimated that a majority of the companies in their industry offer health benefits.

Q. Most companies’ health-care costs have skyrocketed during the past few years. What factors do you believe most heavily contribute toward these increases?

A. Companies in the NAPEO survey pointed the finger at litigation on malpractice, insurance companies, and overpriced prescription drugs, roughly the same suspects as last year, although prescription drugs took more blame in 2007.

Q. Did your company’s health insurance options improve when you outsourced your human relations work to a professional employer organization?

Forty percent of the respondents—all PEO clients—said yes; 22 percent, no; almost 40 percent said they weren’t sure.

Q. How many people does your company employ?

A. The largest group, nearly one-third of the respondents, employed 10 or fewer people. The average PEO client has 19 employees.

Q. Which of the following best describes your industry?

A. By far the most, 23 percent, were in services; construction was next at 16 percent, then manufacturing at 11 percent.

Proudly Sponsored by these PEO Industry Vendors and Suppliers