October 14, 2004 | Read Time: 3 minutes
The cost of providing health benefits to employees has been rising fast for many nonprofit groups, according to a new report by the Johns Hopkins University’s Center for Civil Society Studies.
More than 60 percent of the 250 organizations in the study said their health-benefit costs had increased by 11 percent or more in the past year — a finding in keeping with the 11.2-percent average increase for all types of employers reported in another study. Fifteen percent of the nonprofit groups said their costs had increased 20 percent or more in the last year.
The study, part of the center’s Nonprofit Listening Post Project, was based on data from organizations that provide services to children, elderly people, and families, as well as economic-development groups, museums, and theaters.
Some management experts said the report’s findings were particularly troubling because nonprofit organizations are less able to absorb the increases than their for-profit counterparts.
“At a time when donors are pressuring nonprofits to reduce their overhead costs, we are seeing tremendous escalation in the cost of operations, including skyrocketing health-care costs, caused by factors outside of organizations’ control,” said Roni D. Posner, executive director of the Alliance for Nonprofit Management. “Ensuring the resources necessary for nonprofits to continue to operate — to deliver critical services to meet the increasing needs of beneficiary communities — requires immediate, specific action on health-care policy.”
Retaining Employees
In response to the increases in health-insurance rates, more than 60 percent of the organizations surveyed said they raised the share their employees must pay for health benefits, including increasing employees’ share of drug costs (45 percent), the percentage employees owe when they receive medical services (40 percent), and employees’ share of health-care premiums (36 percent).
Such changes could ultimately hurt the ability of charities to retain and recruit employees, said Lester Salamon, director of the Center for Civil Society Studies and a co-author of the report.
“Health benefits have been one of the major attractions of nonprofit employment, and nonprofit employers are considerably more likely to provide such benefits than comparable for-profit employers,” Mr. Salamon said. More than 90 percent of organizations in the survey said they provide health-insurance coverage for their employees, well above the 63 percent for all employers reported by the Kaiser Family Foundation and Health Research and Education Trust.
Mr. Salamon said the health-insurance situation for nonprofit organizations may be even worse than the report suggested since the Hopkins study sought information from nonprofit groups that are affiliated with national umbrella organizations, and those charities tend to have the best access to group-insurance plans.
Reducing Other Benefits
Among the survey’s other findings: Fifty-five percent of the organizations said they tried to avoid cutting back the types of coverage they provide by seeking savings elsewhere or generating additional revenue. In some cases, the cost-cutting solutions required eliminating raises or reducing other employee benefits in response to rising health-insurance costs. Thirty-three percent reported eliminating raises, bonuses, or non-health benefits; 22 percent reduced the size of their staffs or delayed hiring needed workers; and 17 percent changed some workers from full-time to part-time status or shifted work to contract employees.
“To cope with increases, nonprofits have had to exact a kind of ‘silent tax’ on their employees in order to shield their clients from the effects,” Mr. Salamon said. “This is putting a strain on the organizations at a time when they can least afford it.”
The results of the survey are available on the Listening Post Project Web site at http://www.jhu.edu/listeningpost/news. Free copies are also available from the Center for Civil Society Studies, Institute for Policy Studies, Johns Hopkins University, 3400 North Charles Street, Baltimore, Md., 21218-2688; (410) 516-4363.
