TruSecure wrestled with that possibility when it considered making changes to its health plan last year. Faced with premium increases ranging from 20 to 50 percent, the company needed to rein in costs. One option was to switch to a cheaper plan that offered significantly fewer benefits. This option was discarded because TruSecure feared it might prompt employee defections. (There is still intense demand for people who specialize in IT security.) “We couldn’t justify the disruption to employees,” says Murphy. Or the expense — the administrative cost of changing plans is a deterrent for small companies.
Instead, TruSecure decided to ask employees to pay roughly 25 percent of the $200,000 increase in the premium from 2001 to 2002. In the past, the company paid 100 percent of the premium for individuals, and asked only a small percentage for additional dependents.
Like many companies, TruSecure is working hard to make employees aware of the high cost of health care. “You have to impress on them the cost of these services,” says Murphy. He adds that many employees were surprised by the real cost of their health care. When the company outlined how much of the increase it would cover and how much employees were expected to contribute, “they understood,” says Murphy. “They didn’t push back.”
While TruSecure was able to avoid making wholesale changes to its health plan for 2003, Murphy is not so sure that, given the economic climate, the company will be able to escape them in the future. “We’ll review the plan next year,” he says. “If this continues, we’ll probably have some harder decisions to make.” Still, adds Murphy, closing the plan will not be one of them.
“I’d be hard-pressed to think we would ever reach that point,” agrees Christine J. Cox, CFO of MetraTech Corp. The Web-based billing-software provider, located in Waltham, Massachusetts, was forced to raise the annual employee-paid portion of its health plan from 20 percent to 34 percent, or $1,200 per year, after the overall cost of its BlueCross BlueShield plan rose 14 percent in 2002. (Cox expects an additional 20 percent increase for 2003.) The company had already increased copayments from $5 to $15 for routine doctor visits. “It’s been a difficult few years for us in this area,” she says.
Like Murphy, Cox worries that asking employees to take on additional health-care costs could prompt some of them to look elsewhere for work. “Cutting costs tends to test the boundaries of loyalties,” she says. To offset the cutbacks, Cox says MetraTech is offering more soft benefits that cost less, but are valued by employees. For example, the company has increased tuition reimbursement, and added more on-the-job training and more holidays.
Solutions Are Few
Small companies are anxiously awaiting the answer to spiraling costs, but solutions, unfortunately, are few. Buying coalitions, once the great hope for controlling health-care costs for small companies, haven’t really panned out. “They’ve had mixed results,” notes Kaplan. One of the problems is that companies have too many individual needs: one size does not fit all. Then there is the cost of running such a coalition, which can cut into the savings.
Health care is likely to be the subject of vigorous debate on Capitol Hill this year. But if small companies are waiting for Washington to solve their health-care problems, Brandeis’s McDonough says they’ll be waiting a long time. The early indications are that Congress will consider passing legislation that will create tax credits for uninsured individuals. Other items on the agenda include expanding medical savings accounts and increasing prescription-drug coverage for seniors.
Some Democrats are talking about universal health care again, but the plans are short on details, and few of them offer much hope for small companies. According to Judith Feder, professor and dean of public policy at the Georgetown Public Policy Institute, “It’s like throwing them a 10-foot ladder to get out of a 20-foot hole.”
The great unanswered question is whether pushing costs back on employees will depress consumer confidence. The additional portion employees are being asked to pay for health care could well negate the tax decreases that President Bush is counting on to restart the economy.