Smaller Firms Hard Hit by Health Cost Hikes

The National Association of Manufacturers (NAM) said its recent survey found 86.9% of respondents were having the hardest time grappling with health insurance issues. The next most cited problem was finding qualified employees (46%), followed by competition from imports (39%).

When asked about specific benefits offerings, respondents said they planned to add, improve or maintain over the next 24 months, respectively:

• Health/medical insurance – 0.6%, 2.1%, 80.8%
• Health Savings Accounts – 17.7%, 10.5%, 20.7%
• Defined benefit plans – 0.4%, 1.5%, 22.4%
• Profit-sharing/401(k) plans – 1.7%, 14.1%, 76.5%
• Bonuses – 1.1%, 19%, 66.7%
• Term life insurance – 0.6%, 2.4%, 80.8%
• Stock ownership plans – 1.1%, 5.6%, 21.2%
• Tuition reimbursement – 1.7%, 2.6%, 64.7%
• Child care – 0.9%, 0%, 11.5%
• Parental leave – 0.6%, 0.2%, 53.6%
• Flex-hours – 1.7%, 5.8%, 48.5%
• Flexible benefits – 2.1%, 4.3%, 36.3%
• Telecommuting – 0.6%, 4.1%, 23.9%

Some 4.3% of respondents said they planned to drop their defined benefit plans.

Cost Experience

Concerning health care coverage, while just under a third (31%) of small- and medium-sized manufacturers reported single-digit cost increases in the last year, nearly half (49%) said their health costs were up 11% to 20% in the previous 12 months. Another 16% said costs rose by more than 20%.

Faced with health coverage costs increasing at the same rate in the future, nearly seven in 10 (69%) said they would boost the employees’ share of coverage costs, while another 19% said they would change to a defined contribution health care plan or a health savings account. About 3% said they would drop health care coverage altogether.

Turning to hiring, more than half of respondents (54%), said they expected to increase the number of full-time employees at their firm this year, compared with 42.5% who added staff last year. Another 37% said they expected their employment to stay the same as it was last year, while about 9% expected a staff reduction.

Looking ahead, only about 3% of the firms said employee wages were expected to go up by more than 10% this year, while almost 9% said wages were expected to rise by 5% to 9%, and 72% said increases would be less than 5%. Another 15% said wages would stay about the same, and less than 1% expected a decline.

The survey, e-mailed to 5,100 small- and medium-sized manufacturers nationwide, received about 470 responses, NAM said. Participants were mostly private, family, and individually owned firms with median sales of $13 million per year. More than half, or 56%, employ 100 or fewer workers, while 35% have between 100 and 500 workers, and 9% employ more than 500 workers. Survey results are here .