Managed Care and Employer Premiums

This paper used 1993–1997 data from medium and large size employers to examine the effects of market wide managed care penetration on the premiums paid for employer sponsored health insurance. Regressions were run for weighted average single coverage premiums and for premiums on conventional, HMO, and PPO coverage. Four findings emerged from the analysis. First, increased managed care penetration had no statistically significant effect on weighted average employer premiums. Second, higher HMO penetration resulted in lower HMO premiums but higher conventional and PPO premiums. Third, higher PPO penetration had no statistically meaningful effects across plan types. Finally, the results depended critically on whether firms offered self-insured plans. Higher levels of HMO penetration led to smaller increases in conventional and PPO premiums for firms with self-insured plans, but also yielded smaller premium reductions from HMOs relative to those with purchased coverage.     

Subsidies to employee health insurance premiums and the health insurance market

One approach to covering the uninsured that is frequently advocated by policy-makers is subsidizing the employee portion of employer-provided health insurance premiums. But, since the vast majority of those offered employer-provided health insurance already take it up, such an approach is only appealing if there is a very high takeup elasticity among those who are offered and uninsured. Moreover, if plan choice decisions are price elastic, then such subsidies can at the same time increase health care costs by inducing selection of more expensive plans. We study an excellent example of such subsidies: the introduction of pre-tax premiums for postal employees in 1994, and then for the remaining federal employees in 2000. We do so using a census of personnel records for all federal employees from 1991 through 2002. We find that there is a very small elasticity of insurance takeup with respect to its after-tax price, and a modest elasticity of plan choice. Our results suggest that the federal government did little to improve insurance coverage, but much to increase health care expenditures, through this policy change.     

What's Driving the Downward Trend in Employer‐Sponsored Health Insurance?

OBJECTIVE: We investigate the factors driving the downward trend in employer sponsored health insurance (ESI) coverage between 1999 and 2002 for low- and middle-income workers, and assess their insurance options in the absence of ESI coverage. DATA: We use the 1999 and 2002 rounds of the National Survey of America's Families (NSAF), supplemented with ESI premiums from the Medical Expenditure Panel Survey, as well as other state- and county-level data from a variety of sources. The sample includes workers between the ages of 19 and 64. STUDY DESIGN: We first estimate linear probability models of the probability of having an ESI offer and, for those with an offer, the probability of taking up ESI coverage, using two-stage least square regression on the 2002 worker sample. We then use Oaxaca-Blinder regression-based decomposition methods to identify the factors that explain the changes in ESI offer and take-up between 1999 and 2002. PRINCIPAL FINDINGS: We find that while low-income workers are more likely to be uninsured and are most vulnerable to the loss of ESI coverage, many middle-income workers are also in a precarious position when faced with the loss of ESI coverage. Many low- and middle-income workers have few coverage options in the absence of ESI. This is particularly problematic for low-income workers: only 13 percent have a spouse with an ESI offer and the nongroup premium they face increased at a much higher rate than for middle-income workers. Finally, we find that the drop in ESI offers between 1999 and 2002 was driven largely by changes in nature of the workers' jobs, while the drop in ESI take-up was driven largely by rising ESI premiums. CONCLUSIONS: Policies that shore up the ESI system are important for both low- and middle-income workers, as both are vulnerable to a loss of insurance coverage in the absence of ESI. Over time, the potential coverage options available to low- and middle-income workers in the absence of ESI have narrowed as nongroup premiums have increased. While public coverage has provided some protection from that increase for low-income workers, middle-income workers are much less likely to have access to public protection.     

Health insurance take-up by the near-elderly

OBJECTIVE: To examine the effect of price on the demand for health insurance by early retirees between the ages of 55 and 64. DATA SOURCE: Administrative health plan enrollment data from a medium-sized U.S. employer. STUDY DESIGN: The analysis takes advantage of a natural experiment created by the firm's health insurance contribution policy. The amount the firm contributes toward retiree health insurance coverage depends on when a person retired and her years of service at that date. As a result of this policy, there is considerable variation in out-of-pocket premiums faced by individuals in the data. This variation is independent of the nonprice attributes of the health insurance plans offered and is plausibly exogenous to individual characteristics that are likely to affect the demand for insurance. A probit model is used to estimate the decision to take-up employer-sponsored health insurance by early retirees between the ages of 55 and 64. Demand for insurance is measured as a function of out-of-pocket premiums and a set of individual characteristics. PRINCIPAL FINDINGS: We find that price has a small but statistically significant effect on the decision to take up coverage. Estimated price elasticities range from -0.10 to -0.16, depending on the sample. CONCLUSIONS: The implied elasticities are comparable with results found in previous studies using very different data. Our estimates indicate that policy proposals for a Medicare buy-in or a nongroup tax credit will have a modest impact on take-up rates of near-elderly retirees.     

Immigrants and Employer-Sponsored Health Insurance

Objective. To investigate the factors underlying the lower rate of employer-sponsored health insurance coverage for foreign-born workers.
Data Sources. 2001 Survey of Income and Program Participation.
Study Design. We estimate probit regressions to determine the effect of immigrant status on employer-sponsored health insurance coverage, including the probabilities of working for a firm that offers coverage, being eligible for coverage, and taking up coverage.
Data Extraction Methods. We identified native born citizens, naturalized citizens, and noncitizen residents between the ages of 18 and 65, in the year 2002.
Principal Findings. First, we find that the large difference in coverage rates for immigrants and native-born Americans is driven by the very low rates of coverage for noncitizen immigrants. Differences between native-born and naturalized citizens are quite small and for some outcomes are statistically insignificant when we control for observable characteristics. Second, our results indicate that the gap between natives and noncitizens is explained mainly by differences in the probability of working for a firm that offers insurance. Conditional on working for such a firm, noncitizens are only slightly less likely to be eligible for coverage and, when eligible, are only slightly less likely to take up coverage. Third, roughly two-thirds of the native/noncitizen gap in coverage overall and in the probability of working for an insurance-providing employer is explained by characteristics of the individual and differences in the types of jobs they hold.
Conclusions. The substantially higher rate of uninsurance among immigrants is driven by the lower rate of health insurance offers by the employers of immigrants.     

Did the Affordable Care Act's dependent coverage mandate increase premiums?

We investigate the impact of the Affordable Care Act's dependent coverage mandate on insurance premiums. The expansion of dependent coverage under the ACA allows young adults to remain on their parent's private health insurance plans until the age of 26. We find that the mandate has led to a 2.5–2.8 percent increase in premiums for health insurance plans that cover children, relative to single-coverage plans. We are able to conclude that employers did not pass on the entire premium increase to employees through higher required plan contributions.     

Health care reform : Motivation for discrimination?

One of the major issues in the health care reform debate is the requirement that employers pay a portion of their employees' health insurance premiums. This paper examines the method for calculating the employer share of the health care premiums, as specified in the President's health care reform proposal. The calculation of the firm's cost of providing employee health care benefits is a function of marital status as well as the incidence of two-income earner households. This paper demonstrates that this method provides for lower than average premiums for married employees with no dependents in communities in which there is at least one married couple where both individuals participate in the labor market. This raises the non-wage labor costs of employing single individuals relative to individuals which are identical in every respect except their marital status. This paper explores the economic implications for hiring, as well as profits, for firms located in a perfectly-competitive industry. The results of the theoretical model presented here are clear. Under this proposed version of health care reform, ceteris paribus, firms have a clear preference for two-earner households. This paper also demonstrates that the incentive to discriminate is related to the size of the firm and to the size of the average wage of full-time employees for firms which employ fewer than fifty individuals. While this paper examines the specifics of President Clinton's original proposal, the conclusions reached here would apply to any form of employer-mandated coverage in which the premiums are a function of family status and the incidence of two-earner households.     

A Needle in a Haystack? Uninsured Workers in Small Businesses That Do Not Offer Coverage

OBJECTIVE: To describe the insurance status of workers at small businesses, and to describe the status of uninsured persons by the employment characteristics (employment status, firm size, and whether the employer offers insurance) of the head of household. DATA SOURCES: Data from the March and February 2001 Current Population Survey, and a survey of 2,830 small businesses in San Diego County conducted in 2001. STUDY DESIGN: The survey of small businesses was undertaken as part of a project testing the response of employers to offers of subsidized coverage. Employers were asked whether they offered insurance, and about the insurance status of their employees. The merged February-March 2001 CPS was used to identify the employment status, firm size, and employer-offering status for uninsured persons in the U.S. DATA COLLECTION: Telephone interviews with small businesses in San Diego County. PRINCIPAL FINDINGS: Only 21 percent of the uninsured in the U.S. are full-time employees (or their dependents) in small businesses (<100 employees) that do not offer insurance. The employment status of the uninsured is heterogeneous: many work for large employers, small employers who do offer insurance, or are self-employed, part-time workers, or have no workers in the household. Although there are many small businesses in San Diego that do not offer coverage, most of them have very few uninsured workers. Over 50 percent of businesses that do not offer coverage have either zero or one uninsured worker. There are very few small businesses that do not offer coverage and that have substantial numbers of uninsured workers. These businesses are not quite as rare as a needle in a haystack, but they are very difficult to find. CONCLUSIONS: If all small businesses that do not offer insurance now could be persuaded to start offering coverage, and if all the full-time workers (and their dependents) in those businesses accepted insurance, the number of uninsured would decline by 21 percent--a significant decline, but leaving 80 percent of the problem untouched. If the prime target for programs of subsidized insurance are small businesses that do not offer coverage now and that have substantial numbers of uninsured workers, the target is very small.     

Premium growth and its effect on employer-sponsored insurance

We use variation in premium inflation and general inflation across geographic areas to identify the effects of downward nominal wage rigidity on employers’ health insurance decisions. Using employer level data from the 2000 to 2005 Medical Expenditure Panel Survey-Insurance Component, we examine the effect of premium growth on the likelihood that an employer offers insurance, eligibility rates among employees, continuous measures of employee premium contributions for both single and family coverage, and deductibles. We find that small, low-wage employers are less likely to offer health insurance in response to increased premium inflation, and if they do offer coverage they increase employee contributions and deductible levels. In contrast, larger, low-wage employers maintain their offers of coverage, but reduce eligibility for such coverage. They also increase employee contributions for single and family coverage, but not deductibles. Among high-wage employers, all but the largest increase deductibles in response to cost pressures.     

The Effect of Medicare Eligibility on Spousal Insurance Coverage

A majority of married couples in the USA take advantage of the fact that employers often provide health insurance coverage to spouses. When older spouses become eligible for Medicare, however, many of them can no longer provide their younger spouses with coverage. In this paper, we study how spousal eligibility for Medicare affects the health insurance and health care access of younger spouses. We find that spousal eligibility for Medicare results in younger spouses no longer having employers pay for their insurance and being less likely to have employer‐sponsored coverage. Instead, younger spouses switch to privately purchased coverage, which tends to be worse than what they had before their spouses became eligible for Medicare. We also find suggestive evidence that younger spouses are less likely to use health care services after their older spouses become eligible for Medicare. Copyright © 2015 John Wiley & Sons, Ltd.     

Corporate benefit policies and health insurance costs

We tested the hypothesis that health insurance premium costs per employee are lower for employee groups where multiple health plans are offered and the employer pays a level dollar amount of the chosen premium than for employee groups where these two conditions are not met. Proposed national legislation relies on these conditions to create a competitive health care market. Data on 56 employee groups in 1981 and 66 employee groups in 1982 were collected from two surveys of large employers in Minnesota. Regression analysis of premium data from both surveys rejected the hypothesis. Indemnity plans in multiplan groups were cheaper if the employer paid a level dollar contribution versus a level percent (including 100) contribution. However, groups offered only an indemnity plan had lower premiums than groups meeting the two legislative conditions. These findings apply to both individual and family coverage premiums and are not caused by systematic differences in benefit provisions, employee demographics or factors influencing loading charges. Our findings cast doubt on attempts to achieve health care competition by legislative changes in insurance options and contribution methods.     

Compensating wage differentials and the impact of health insurance in the public sector on wages and hours

This paper examines the trade-off between wages and employer spending on health insurance for public sector workers, and the relationship between coverage and hours worked. Our primary approach compares trends in wages and hours for public employees with and without state/local government provided health insurance using individual-level micro-data from the 1992–2011 CPS. To adjust for differences between insured and uninsured public sector employees, we create a matched sample based on an employee's propensity to receive health insurance. We assess the relationship between state contribution to the health plan premium, state-level healthcare spending, and the wages and hours of state and local government employees. We find modest reductions in wages are associated with having employer-sponsored health insurance (ESHI), although this effect is not precisely measured. The reduction in wages associated with having ESHI is larger among non-unionized workers. Further, we find little evidence that provision of health insurance increases hours worked.     

Have small-group health insurance purchasing alliances increased coverage?

We use data from 1993 and 1997 employer surveys to assess whether the three largest statewide small-group health insurance purchasing alliances--in California, Connecticut, and Florida--increased coverage in small business. They did not. Specifically, they did not reduce small-group market health insurance premiums, and they did not raise small-business health insurance offer rates. We explore and discuss some reasons why. Alliances do permit employers to offer much greater choice in the number and types of plans; employees are found to take advantage of this wider choice.     

Subsidies and the demand for individual health insurance in California

OBJECTIVE: To estimate the effect of changes in premiums for individual insurance on decisions to purchase individual insurance and how this price response varies among subgroups of the population. DATA SOURCE: Survey responses from the Current Population Survey (http://www.bls.census.gov/cps/cpsmain.htm), the Survey of Income and Program Participation (http://www.sipp.census.gov/sipp), the National Health Interview Survey (http://www.cdc.gov/nchs/nhis.htm), and data about premiums and plans offered in the individual insurance market in California, 1996-2001. STUDY DESIGN: A logit model was used to estimate the decisions to purchase individual insurance by families without access to group insurance. This was modeled as a function of premiums, controlling for family characteristics and other characteristics of the market. A multinomial model was used to estimate the choice between group coverage, individual coverage, and remaining uninsured for workers offered group coverage as a function of premiums for individual insurance and out-of-pocket costs of group coverage. PRINCIPAL FINDINGS: The elasticity of demand for individual insurance by those without access to group insurance is about -.2 to -.4, as has been found in earlier studies. However, there are substantial differences in price responses among subgroups with low-income, young, and self-employed families showing the greatest response. Among workers offered group insurance, a decrease in individual premiums has very small effects on the choice to purchase individual coverage versus group coverage. CONCLUSIONS: Subsidy programs may make insurance more affordable for some families, but even sizeable subsidies are unlikely to solve the problem of the uninsured. We do not find evidence that subsidies to individual insurance will produce an unraveling of the employer-based health insurance system.     

Individual versus job-based health insurance: weighing the pros and cons

Although the majority of insured Americans receive their health insurance through their employers, some depend on the individual health insurance market. However, with increased criticism of the lack of choice in group coverage and various proposals including subsidies or tax credits to decrease the number of uninsured, the individual market may start to play a larger role. In this paper we conclude that although efficient large-group insurance will appropriately continue to exist, the individual market appears to be improving, in both administrative cost and protection against high premiums associated with high risk. For diverse workers now in small groups with little plan choice, the individual market might become a reasonable alternative.     

The health status of workers who decline employer-sponsored insurance

This paper uses data from the 1997 National Health Interview Survey to compare workers who decline employers' offers of health insurance (decliners) with comparison groups of workers who take up offers of employer coverage and those who do not have such offers. Uninsured decliners fare much worse than coverage takers on every mental health measure. While the evidence on physical health measures is somewhat mixed, decliners who are not healthy appear to have greater difficulty obtaining needed services than do workers who take up employer coverage, although decliners tend to have somewhat better access than do the uninsured who are not offered such coverage.     

Why did employee health insurance contributions rise?

We explore the causes of the dramatic rise in employee contributions to health insurance over the past two decades. In 1982, 44% of those who were covered by their employer-provided health insurance had their costs fully financed by their employer, but by 1998 this had fallen to 28%. We discuss the theory of why employers might shift premiums to their employees, and empirically model the role of four factors suggested by the theory. We find that there was a large impact of falling tax rates, rising eligibility for insurance through the Medicaid system, rising medical costs, and increased managed care penetration. Overall, this set of factors can explain more than one-half of the rise in employee premiums over the 1982-1996 period.     

Health care coverage and costs in small business: an exploratory study

Health coverage and health care costs continue to frustrate employers, employees, and public policy makers. Controlling escalating health costs, improving coverage for the uninsured, and providing retiree health care are all important to the small employer. This study was undertaken to investigate the availability and extent of health care coverage and to assess the effects of health care costs on small firms. The results revealed that the percentage of small firms offering health benefits totaled 58 percent. The availability of group health insurance increases as firm size increases. Small employers cited insufficient profits, high insurance costs, and unavailable group coverage as the primary reasons for not offering health benefits. The results also indicated that the vast majority of small firms opposed a mandated employer-provided health coverage and suggested that small businesses should pool together to form groups to reduce the cost of health care coverage for small firms.     

Health Care Coverage and Costs in Small Business: An Exploratory Study

Health coverage and health care costs continue to frustrate employers, employees, and public policy makers. Controlling escalating health costs, improving coverage for the uninsured, and providing retiree health care are all important to the small employer. This study was undertaken to investigate the availability and extent of health care coverage and to assess the effects of health care costs on small firms. The results revealed that the percentage of small firms offering health benefits totaled 58 percent. The availability of group health insurance increases as firm size increases. Small employers cited insufficient profits, high insurance costs, and unavailable group coverage as the primary reasons for not offering health benefits. The results also indicated that the vast majority of small firms opposed a mandated employer-provided health coverage and suggested that small businesses should pool together to form groups to reduce the cost of health care coverage for small firms.