Premium variation remains wide among small groups as costs rise

Premiums for small group insurance fall as size increases and companies gain economies of scale.

NATIONAL REPORTS-Premiums for small group insurance fall as size increases and companies gain economies of scale. A recent survey conducted by America's Health Insurance Plans (AHIP) defines exactly how much the premiums fall.

The average single monthly premium paid by an employer in 2010 was:

That's a $40 range in averages among the surveyed groups.

The 2010 study also shows that variation in premiums among smaller groups can be attributed to a wider range in ages and greater statistical fluctuations compared to large-employer counterparts.

A study by the Kaiser Family Foundation (KFF) on 2010 employer health benefits finds that in a PPO with an annual $13,735 premium, small-group employees contribute $4,380. With a large-group PPO premium of $14,161, employees contribute $3,586.

"The total premium is lower in smaller firms and the worker is paying more," says Larry Levitt, senior vice president of KFF.

Patricia Perez, partner of VPE Public Relations, a 15-employee firm in Pasadena, Calif., funds a basic HMO benefit plan, costing $4,000 a month. Employees have the ability to upgrade to a more robust plan, paying the difference. In general, she says, they choose PPOs with high deductibles. The basic plan includes low copays for doctor visits, generic prescriptions and hospital coverage. She has seen a consistent 10% to 20% annual increase in premiums.

"Despite efficiencies in healthcare, we never seem to realize any savings-maybe a slight reduction in premiums but no savings," she says.

The KFF study says that 35% of covered workers in small firms have an employer that pays the full premium for single coverage.

"Because small groups need to have a minimum number of participants in a plan to receive insurance coverage, employers usually do not charge premiums to employees," says Paul Fronstin, director, Employee Benefit Research Institute. "What alternative do small employers have but to raise deductibles?"