Employer health insurance costs rose by an average of 9.4 percent to $7,139 per employee in 2007, extending a period of high health-plan inflation that has seen costs double for many employers over the past six years.

The relentless climb of health insurance costs has hit small companies the hardest, NJBIA said today in releasing the findings of its 2008 Health Benefits Survey.

The average cost of an insurance policy for companies with 51 or more employees rose by an average of 7.7 percent to $6,598 per employee.  But the average cost of an insurance policy for smaller companies, those with 2-50 employees, rose by an average of 9.8 percent to $7,251 per employee in 2007. 

In spite of soaring costs, 98 percent of companies with 51 or more employees said they still provide health insurance coverage as an employee benefit.  But a growing number of smaller companies said they have dropped coverage because they can no longer afford it.

“The average cost has doubled over the past six years,” said NJBIA Senior Vice President Melanie Willoughby.  “It’s reached the point where a lot of small companies simply can’t afford it anymore.” 

Many small companies that still provide health insurance coverage said they had to scale back hiring plans or limited pay increases to continue to afford that coverage.

These are among the major findings of the New Jersey Business & Industry Association’s 2008 Health Benefits Survey, which was conducted in January 2008. The findings are based on the first 1,047 responses.  The survey participants, 88 percent of whom were small companies with 2-50 employees, represented all major industry sectors and came from all 21 New Jersey counties. 

Among other survey findings:

• The average cost of $7,139 per covered employee in 2007 included coverage of both full-time employees with no covered dependents and full-time employees with covered spouses and/or dependents.  This was the amount paid by the employer.  It did not include the share of premium costs paid by employees.

• The average increase of 9.4 percent for all companies in 2007 followed increases of 11.3 percent in 2006, 12 percent increase in 2005, and 11.2 percent in 2004.  Factoring in increases of 13.2 percent and 15 percent recorded by the NJBIA survey in 2002 and 2003, and given the effects of compounding, employers paying these average cost increases would have seen their costs double over the past six years.

• The cost of health insurance, as a percentage of wages and salaries, also rose for many companies last year.  The average cost of $7,139 per employee represented 15 percent of reported average wages of $47,414.  This is up from 2006, when employer health insurance costs represented 13.5 percent of average wages.

• As a group, employers do not expect their health plan costs to moderate anytime soon. Survey participants anticipate that their costs will increase by an average of 9.7 percent in 2008.

• The proportion of the smallest companies, those with 2-19 employees, sponsoring coverage has fallen as costs have risen.  Seventy-five percent of this group reported providing coverage in the current survey, down from 92 percent four years ago.  The average size company in this group has six employees.

• When companies that no longer provide coverage were asked why, 76 percent said they could no longer afford it.  Another 10 percent said they were unable to satisfy the State’s requirement that at least 75 percent of their workforce participate in the plan.

• NJBIA’s 2008 Health Benefits Survey was distributed in January 2008 to a random sample of the Association’s members.  The results are based on the first 1,047 responses from a target group of 8,738 member companies, yielding a response rate of 12 percent.  As a group, the respondents generally reflected the Association’s membership profile, representing every industry in every region of the state.  Eight-eight percent of respondents were small companies with 2-50 employees.