Mid-market companies on average were charged substantially higher premiums for group health insurance coverage in 2012 than larger firms, according to a study released Monday by Automatic Data Processing Inc.
Companies with between 1,000 and 2,499 full- and part-time employees were charged an average $10,351 per employee in 2012, 16% more than employers with more than 5,000 or more workers and 8.3% more than employers with between 2,500 and 4,999 workers, according to ADP's study. The average annual per-employee premium cost across all employers surveyed was $9,562.
Chris Ryan, ADP's vice president of strategic advisory services and co-author of the study, said in an email that several factors are likely to blame for midsize employers' cost disadvantage.
Midmarket firms “lack the size and scale needed to negotiate more favorable agreements with health plans, networks and TPAs. They are also less likely to operate self-funded health plans with the potential to reduce premiums,” Mr. Ryan said, adding that recent ADP research also suggested that “larger employers are more likely to have the financial wherewithal to provide employees with a health and wellness program to help contain premium costs.”
“Larger employers may be more effective in communicating and implementing consumer-driven health plans, and may also have more effective practices for conducting audits to ensure member eligibility,” Mr. Ryan said.
ADP's “2012 Study of Large Employer Benefits,” the first of its kind for the Roseland, N.J.-based payroll processing firm, examined health care costs and participation rates among 300 employers with more than 1,000 employees. In total, the study encompassed more than 2 million covered lives, including employees and their dependents.
Beyond headcount, certain other demographic factors were found to be predictive of higher-than-average health benefit costs. Manufacturers, professional and scientific services firms, health care providers and information technology firms were charged between 3% and 13% per employee per month more for group health benefits than the average employer, according to ADP's study.
In part, those industries' higher health care costs were driven by the average age of their respective workforces. Manufacturing companies were charged $899 per employee per month in premiums, the highest of any industry surveyed, and had an average employee age of 45.5 years. Conversely, employers in the hospitality and food services industry incurred the lowest monthly per-employee premiums in 2012 ($596) and the lowest average employee age (36.9 years) of any industry group surveyed.
Other factors such as geographic location and the “richness” of the benefits provided contributed to the disparity in benefits costs among industries, the study noted.
And THIS is yet another reason that government and business leaders must stop neglecting and start nurturing the Midmarket business sector. 196,000 companies = 3% of all US companies. That 3% accounts for 31% of our GDP and 34% of all private sector jobs created in the United States. They are grownup start-ups; too big to be small and too small to be big. They have unique challenges that few are helping them address. Strains like this one can cripple them - in this case, when competing for top talent that can take them to the next level. More on this topic at www.midmarket.org.
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