Coping with Ever-Rising Health Costs

For many of New Jersey's small-business owners, health insurance benefits have become the three most expensive words in the English language.

These companies are coping with ballooning premiums in a variety of ways, trying to strike a balance between insuring their employees and keeping their

Some companies are paying the rising rates while others have dropped their health benefits altogether. Some businesses have struck a compromise in which employer and employee share the burden to varying degrees.

"We used to pick up 100 percent, then it was 75 and now it's probably around 60," says Scott Coppola, president of Mark Lighting Fixture in Edison, a maker of specialty commercial-lighting products. Last year, the company was hit with a 30 percent increase in health insurance premiums that it passed on to its roughly 70 employees.

Coppola says every year he explains to his staff how the company's insurance increases will be paid. "I share it with them, black and white," he says. "I struck a deal with them a couple of years ago that I was going to start passing some of it on, and they understood that. But when [the insurance company] sought 30 percent, I couldn't jam it all down their throats, so I had to reach a compromise."

Coppola says sharing health insurance costs and providing annual pay raises are essential to his company. "I've got to keep my employees motivated," he says. "Having no raises would be hard for them to swallow."

Parkway-Kew, a specialty machinerepair shop in North Brunswick with 40 employees, three years ago switched to an HMO plan with higher employee deductibles than under the company's previous coverage.

Parkway-Kew also replaced a drug prescription plan that had a nominal deductible with 50/50 cost sharing on prescriptions after the employee reaches $500 a year in out-ofpocket spending. "That's dropped the company's cost down quite a bit, and really hasn't put a total burden on the employee," says spokeswoman Rosemary Wick.

Rising insurance premiums have caused other small companies to switch to a 50/50 pay partnership with employees. "Rather than bear the whole expense as the employer, we've asked the employees to share," says Kevin Cyrana, vice president and CEO of Englishtown-based EWC Industries, which manufactures air control systems for home heating and air conditioning units.

"We have one-third of employees who are participants; one-third who go under another family member's policy outside the company; and another third that are just rolling the dice," Cyrana says. The company has 60 employees.

Last year, EWC introduced a bare-bones health coverage plan for "the people who are a little tighter with cash," Cyrana says. "Some of the laborers live from week to week."

For some small businesses, funding health care insurance has become a financial shell game. "It's been a disaster," says August Cellitti, managing director and cofounder of R. seelaus & Co., a 50-employee brokerage firm whose employees work on commission. "It's very hard for us to attract employees [who are] big revenue producers. Once you do get a producer here, you have to offer them all the benefits that the big brokerage houses offer."

Summit-based seelaus provides a set dollar amount toward individual coverage for its employees.

Those wanting to add a spouse or family member to the policy must pick up the cost difference.

"With our health care plans going at a rate of almost 20 percent a year-plus, we've had to come up with other ideas," says Cellitti. "Because not only could our employees not afford it, it's got to a point where we can't afford it."

Cellitti says the firm settled on an employee benefits incentive plan where commissioned employees can earn partial company health insurance coverage by reaching set sales goals.

"If they do over a certain sales-revenue amount, we will take half of the health care benefit out of the company's gross revenue," Cellitti says. "If they get to the top sales level, then we'll take 100 percent of the health care out of the gross."

Its new sales-commission revenue plan notwithstanding, Cellitti says seelaus is still struggling. "As a small employer, I'm running out of ideas," he says.

According to Washington, D.C.-based consumer advocacy group Families USA, premiums for employer-provided health insurance in New Jersey rose nearly 80 percent between 2000 and 2006.

During the same period, employees' earnings in the state climbed just 14.4 percent

A New Jersey Business & Industry Association (NJBIA) survey of its members found that yearly health insurance rate increases can impact companies' hiring budgets.

order to continue to hind the health benefits of their existing employees," says Christine Stearns, vice president of health and legal affairs for the organization.

New Jersey's medium to large companies also struggle with soaring health care premiums, but they have more cost wiggle room to work with, according to Adam Speck, New Jersey market director for Washington, D.C.-based Mercer Health Benefits.

Still, even larger companies are being pressured to find places to shave benefits costs, he says.

"There's certainly a lot of talk about these limited medical plans," says Speck. "Whereby you are still providing coverage, but there are more [financial] caps than in your usual benefit plans."

Speck says more medium and big companies are seriously mulling over so-called nonessential benefits including dental and eye coverage. "Some of them are making employees pay more, if not all, of those types of insurance coverage because they do have some flexibility there," he says.

Besides gathering statistical data on state companies' benefits plans, the survey also discovered a growing pessimism among small-business owners on whether state officiais will come up with a legislative remedy to the problem of runaway health costs.

"Some of them are somewhat skeptical, but continue to hope," says Steams. "They're frustrated [that] folks haven't acted to make health insurance more affordable."