ECONOMIC PULSE

Posted April 2008

Taking the pulse of your business’ healthcare

Providing health insurance and encouraging workers to participate in wellness programs are seen as both a large expense and a necessary tool for hiring and retaining quality people. Health insurance ranks second (after compensation) among workers as a reason to work for a particular company.

More tellingly, Americans worry more about “health care costs than losing their jobs, paying their rent or mortgages, losing money in the stock market, or being the victims of a terrorist attack,” according to the Kaiser Health Security Watch October 2007 tracking poll. About six in 10 are worried about health care access and how to pay for care, and four in 10 are “very worried.”

Nationally, Americans spent $2 trillion in 2005 on health and are expected to spend $4 trillion in 2015. The 2015 number would represent 20 percent of the Gross Domestic Product (GDP), according to economists Borger, Christine, et al, in “Health Affairs.”

Locally, healthcare spending by residents of King and Snohomish counties is estimated at nearly $3.9 billion in 2007, according to Claritas, Inc. By 2012, expect $5.6 billion.

Who’s insured? In 2007, 60 percent of private industry establishments in the U.S. offered medical care benefits to employees, with employers paying 81 percent of premium cost for single coverage and 71 percent for family coverage, according to the U.S. Department of Labor's national survey in 2007. There are 46 million or more Americans with no health insurance.

Nationally, the annual health plan premium charged to an employer for a family of four averaged $11,500 in 2006. Of this, workers paid nearly $3,000, which is almost $1,100 more than in 2000, according to a survey by the Henry J. Kaiser Family Foundation as reported by the National Coalition on Health Care. Premiums rose four times faster than workers’ earnings since 2000.

What do small businesses do? Surveys of small business owners (50 or fewer employees) suggest that most either offer health insurance or would like to offer it. Employers worry about keeping their employees healthy and need contingency plans for when key people are out sick, according to the National Association of Professional Employer Organizations, in a 2006 survey.

Why offer insurance? Mercer Health & Benefits LLC and Marsh, Inc. Health surveyed employers of all sizes and concluded that “like ethics and diversity — workforce health is being recognized by … employers as having a measurable impact on business performance.”

“It’s clear that if your employees are not at work — or are at work but not 100 percent healthy — productivity suffers,” noted Sue Willette, head of Mercer’s health and productivity management group. The survey covered more than 600 for-profit and nonprofit U.S. employers. Eight of ten respondents “agreed” or “strongly agreed” that improving employee health is a core business value.

Willette said health benefit cost is 16 percent of payroll. Absence programs add another 4 percent. Add another 3 percent in costs for replacement labor, loss of productivity and, in some businesses, higher liability risk. Together they total nearly a quarter of payroll costs.

Safeway, Inc. has adopted a plan to keep employees healthy and make them more cost-conscious about health services. It shifted from a PPO (preferred provider) plan to health reimbursement accounts. It contributes $1,000 per employee. It also covers all preventive care and screening without a deductible and promotes healthy behaviors with a combination of incentives and education. In 2006, its health care expenses fell 13 percent and in 2007, it is not seeing an increase. One new challenge for employees is finding out the cost of health services. For example, cost for colonoscopy varied from $634 to $6,500.

Listen during breaks and you may hear stories about employees postponing doctor’s visits for themselves or children, elderly relatives having trouble paying what Medicare doesn’t cover, and concern that they’ll never be able to afford to retire because of Medicare cuts and the high cost of supplemental insurance. Ask yourself: have any of your best employees left because another business offered them a better medical plan? How can I compete to keep the best employees?

Sources: Kaiser Health Security Watch October 2007 tracking poll and "2007 Employer Health Benefits Survey" September 2007, Henry J. Kaiser Family Foundation and Health Research and Education Trust; Borger, C., et al, "Health Spending Projections through 2015: Changes on the Horizon," Health affairs Web Exclusive W61: 22 February 2006; 2007 Claritas, Inc.; "National Compensation Survey: Employee Benefits in the United States, March 2007," published August 2007, Bureau of Labor Statistics, U.S. Department of Labor; National Association of Professional Employer Organizations, November 2006; Henry J. Kaiser Family Foundation "Employee Health Benefits: 2006 Annual Survey, September 2006, as reported by the National Coalition on Health Care; "Mercer/Marsh Survey on Health, Productivity and Absence Management programs 2007" Marsh & McLennan Companies, October 2007; Martin, Anya. "Healthier employees, better business idea grows," Atlanta Business Chronicle December 2007; Neurath, Peter. "Safeway joins the employee-health movement" Puget Sound Business Journal December 2007.

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SEATTLE AREA ECONOMIC TRENDS

U.S. ECONOMIC INDICATORS	Q2-08*	Q1-08*	Q2-07
U.S. GDP ($ billions)	$11,723.0	$11,691.2	$11,520.1
U.S. GDP Annual Growth % Change	1.1%	0.5%	3.8%
Inflation (CPI) U.S.	2.130	2.119	2.071
PUGET SOUND ECONOMIC INDICATORS	Q2-08*	Q1-08*	Q2-07
Inflation (CPI) (Seattle-Bellevue-Everett)	2.220	2.207	2.156
EMPLOYMENT	1,860,800	1,855,100	1,823,400
- Government	286,600	285,600	281,200
- Wholesale & Retail Trade	278,100	278,300	278,500
- Professional & Business Services	250,700	249,800	245,100
- Information ( incl. Software Publishers)	90,700	89,800	87,300
- Aerospace	81,800	80,500	76,300
Unemployment Rate (Seattle-Tacoma-Bellevue)	4.3%	4.2%	4.1%
Housing Permits	21,100	23,200	26,000
Home & Condo Sales	59,800	53,300	67,300
Average Home Price	$415,800	$416,500	$430,900
U.S. 30-Year Mortgage Rates	5.7%	5.7%	6.4%
RETAIL SALES ($ billions)	Q2-08*	Q1-08*	Q2-07
Total Taxable Retail Sales	$63.672	$63.088	$60.721
Goods:
- Motor Vehicles & Parts	$14.059	$14.001	$13.504
- General Merchandise	$7.982	$7.849	$7.483
- Food & Beverage	$7.808	$7.733	$7.482
- Gasoline Stations	$6.115	$6.028	$5.704
- Building Materials & Garden Supplies	$4.950	$5.040	$5.079
- Furniture & Electronics	$3.594	$3.580	$3.461
- Clothing & Accessories	$3.159	$3.118	$3.007
Services:
- Food Services & Drinking Establishments	$6.006	$5.917	$5.687
Note date change	Feb-08	Jan-08	Feb-07
Airport Passengers (Sea-Tac)	2,239,796	2,279,465	1,984,119

Base: King, Kitsap, Pierce and Snohomish counties. Sources and Data Notes: Unless otherwise noted, source is Copyright Conway Pedersen Economics, Inc., Seattle, WA http://www.economicforecaster.com March 2008
* Projected
Housing permits are for residential, privately owned units.
Retail Sales - only major categories listed.
Seattle-Tacoma International Airport Activity Reports, March 2008 posting