"We [New Jersey] are one of the only states in the union that does not permit discounts on association health plans. The effect is that many small businesses can't afford to fund health insurance for their employees, therefore qualified employees are harder to attract and harder to hold on to."
Courier-Post Staff
Friday, October 6, 2006
Employee health-care costs top the list of worries for owners of New Jersey's small and medium-size companies according to the PNC Economic Outlook, a survey conducted every six months by PNC Bank.
Of 150 state companies polled, 27 percent listed employee health care as their number one concern. Twenty-four percent of state companies named the nation's dependence upon foreign fuel, while 16 percent cited problems associated with immigration.
Employee health-care costs loom large in New Jersey because of restrictive state insurance laws, according to Art Campbell, president/CEO of the Cherry Hill Regional Chamber of Commerce.
"We are one of the only states in the union that does not permit discounts on association health plans," Campbell said. "The effect is that many small businesses can't afford to fund health insurance for their employees, therefore qualified employees are harder to attract and harder to hold on to."
The study, which was released on Thursday, showed that 41 percent of New Jersey companies are responding to rising health-care costs by limiting hiring (41 percent) and by paring salary increases (45 percent).
Of those offering coverage, 81 percent report that they are likely to reduce benefits due to rising health-care costs, said Stu Hoffman, chief economist for PNC Bank.
Compas Inc., in Pennsauken, is doing just that. Next year, the company's 60 employees will contribute to their own health-care plans for the first time ever, according to Brenda DeLoatch, senior vice president of operations.
"Each year we have to become more and more creative," DeLoatch said. "We would have liked to continue it at no expense to the employees, but we had to ask for a contribution this time. We are holding our breath for next year."
In addition to employee contributions, Compas also switched insurance providers from Aetna to Horizon Blue Cross and Blue Shield. The company also reduced the employee selection of health plans from three to two.
The changes made it possible for Compas to hold cost increases to 13.87 percent. Without the changes, the company would pay 24 percent more, DeLoatch said.
Other PNC results show that companies across the nation expect lower sales and profits and less hiring within the next six months.
"I would say companies are still positive, but their optimism is a bit tempered going into the next six months than they were in the spring, or the fall 2005," Hoffmann said.
National results show:
57 percent expect to increase sales.
47 percent expect to increases profits, while an additional 38 percent expect profits to remain the same.
21 percent expect to hire more personnel, while 71 percent expect their employee numbers to remain the same.
Business people everywhere tend to view their local economies favorably, said Hoffman.
"They are more optimistic about what is happening under their own feet, and what is happening in the nation as a whole," said Hoffman.
In New Jersey, 73 percent are at least moderately optimistic about business in their own state.
Two-thirds of state business owners expect to pay more for energy, labor and materials. However, 57 percent will not put higher prices on their products and services, according to the survey.
"They say that market conditions won't allow it," Hoffman said.
Reach Jeanne Ridgway at (856) 486-2479 or jridgway@courierpostonline.com
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