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.     

Review: Offering Domestic Partnership Health Benefits: An Economic Concern?

In the United States, employers are an important source of health insurance for citizens less than 65 years of age. Yet despite the country's increasing number of unmarried partner households, fewer than 1 in 4 workers are employed by firms that offer healthcare benefits to same-sex and/or opposite-sex domestic partners. This paper presents the main arguments, from societal and employer perspectives, for offering domestic partnership benefits. As the number of companies offering such benefits has grown, data on the direct costs of insurance have become available. The experience of insurers and employers suggests that adverse selection is not a substantial problem. Domestic partners usually account for only a small percentage of an employer's risk pool, which also limits the potential effect on total insurance costs. Although low enrollment attenuates their potential economic impact on national healthcare, domestic partnership health benefits remain important from a sociopolitical standpoint—acknowledging the value of equity and diversity in the workplace.     

After the mandates: Massachusetts employers continue to support health reform as more firms offer coverage

Based on a spring 2008 survey of 1,003 randomly selected Massachusetts firms, this paper examines views and responses of employers to health care reform after employer and individual mandates went into effect. A majority of firms view reform as "good for Massachusetts." The percentage of firms with three or more workers offering coverage increased from 73 percent to 79 percent. Massachusetts employers are less likely than employers nationally to indicate plans to terminate coverage or restrict eligibility for health benefits, which suggests that crowd-out is not occurring.     

Employers' benefits from workers' health insurance

Even though many employers believe that health insurance and health affect employees' productivity and firms' performance, health economists typically overlook and rarely measure firms' returns on health-related investments. Some research, however, suggests that firms may benefit economically by providing health insurance coverage for workers and their families. For example, health coverage may help employers recruit and retain high-quality workers. Health may contribute to productivity by reducing the costs of absenteeism and turnover and by increasing workers' productivity. This article reviews the evidence and proposes an agenda for future research. A better understanding of the benefits to employers of offering health coverage to workers may help clarify employers' behavior and help private employers and public officials make appropriate investments in health.     

The effect of HMOs on premiums in employment-based health plans.

This study documents the effect of HMOs on premiums in employment-based health plans. We analyzed a survey of Minnesota employers conducted in 1986. Among 922 usable observations, 239 firms offered HMOs in addition to fee-for-service (FFS) health plans. We estimated an equation for the probability of offering an HMO, followed by equations for HMO enrollment share, and HMO and FFS premiums. The weighted average HMO and FFS premium in firms that offer HMOs was compared to the premium of FFS-only firms. We found that offering an HMO raises the average premium for family coverage health insurance by $25.14 per month and for single coverage by $3.68 per month. This effect was smaller for firms in the Twin Cities metropolitan area. HMOs may be viewed as a progressive and innovative health care benefit, but they are likely to increase firms' health insurance premiums.     

Job-based health insurance in 2001: inflation hits double digits, managed care retreats

Drawing on the results of a national survey of 1,907 firms with three or more workers, this paper reports on several facets of job-based health insurance, including the cost to employers and workers; plan offerings and enrollments; patient cost sharing and benefits; eligibility, coverage, and take-up rates; and results from questions about employers' knowledge of market trends and health policy initiatives. Premiums increased 11 percent from spring 2000 to spring 2001, and the percentage of Americans in health maintenance organizations (HMOs) fell six percentage points to its lowest level since 1993, while preferred provider organization (PPO) enrollment rose to 48 percent. Despite premium increases, the percentage of firms offering coverage remained statistically unchanged, and a relatively strong labor market has continued to shield workers from the higher cost of coverage.     

Employer-sponsored health insurance for early retirees: impacts on retirement,health, and health care

The proportion of large employers offering retiree health insurance in the US has declined by half in the past 20 years. This paper examines the potential implications of this change by estimating the effects of a retiree health insurance (RHI) offer on a comprehensive set of labor, health and health care use outcomes in the near-elderly population. An RHI offer increases the probability of early retirement by 37% for both men and women. While the results suggest that an RHI offer has little, if any, effect on health, there is strong evidence that RHI provides significant protection from high out-of-pocket medical costs. In the top 40% of the out-of-pocket spending distribution, those with an offer of retiree coverage spend 22% less on average. Estimates of the value of RHI of over $4,000 per year suggest that increasing opportunities for the near-elderly to purchase coverage at actuarially-fair prices through the individual market or public programs could significantly increase insurance coverage and reduce financial risk for this age group.     

How small business health exchanges can offer value to their future customers--and why they must

The success of the Small Business Health Options Program (SHOP)-health insurance exchanges targeted at the small-group market and opening for business in January 2014-will depend in large part on persuading small employers and qualified health plans to participate. The most important objective will be offering employers lower-cost health plans than they have now. Other critical objectives will be offering small firms administrative efficiencies and access to choices among high-value plans that are not offered elsewhere. This article frames the challenges that exchanges will encounter in meeting these objectives. In particular, it discusses the advisability of small-business exchanges' offering an "employee choice" model (which the article describes in detail); of combining the small-business and individual exchanges to broaden product offerings and gain operational efficiencies; and of encouraging low-cost plans to enter the exchange market, perhaps by enabling Medicaid managed care plans to offer comparable commercial products, and in turn affording health plans access to a uniquely motivated market of small firms and their workers who want affordable coverage.     

Employers' views on incremental measures to expand health coverage

This paper examines employers' views on the importance of health benefits and their perspective on policies aimed at expanding health coverage, reducing administrative expenses, and improving the quality of care. Employers of all sizes hold a positive view of the value of health benefits in attracting and retaining workers and in improving workers' health and productivity. Small employers support strategies that would make coverage more affordable; large employers support policies that reduce administrative costs and improve quality. Both support policies that would require additional administrative action as opposed to greater financial commitment on the part of firms in expanding coverage.     

Small businesses' changing views on health reform

Our national sample of 750 randomly chosen firms with fewer than 50 employees reveals surprising findings about the traditional views of small business on health care reform. A substantial segment of the small business community is sympathetic to health care reform, including such controversial measures as mandating that all employers contribute to the coverage of their workers, limits on health care spending, and altering the tax treatment of employer contributions for health insurance. Without premium savings, fewer than half of small businesses support the concept of health insurance purchasing cooperatives. With premium savings, a majority support it.     

Report from Massachusetts: employers largely support health care reform, and few signs of crowd-out appear

Based on a 2007 survey of 1,056 randomly selected Massachusetts firms, this paper presents findings about employers' attitudes about, knowledge of, and responses to recently enacted reform legislation. A majority of Massachusetts employers agree that all employers bear some responsibility for providing health benefits, firms not offering benefits should be required to pay a "fair share" contribution up to $295 annually per employee, and employers with ten or fewer employees should not be exempt from this requirement. Only 24 percent of employers with 3-50 workers are familiar with the Connector purchasing pool. About 3 percent of Massachusetts small employers intend to drop coverage, similar to national figures.     

Managing health care costs: strategies available to small businesses

Although health care costs continue to rise at an alarming rate, small businesses can take steps to help moderate these costs. First, business firms must restructure benefits so that needless surgery is eliminated and inpatient hospital care is minimized. Next, small firms should investigate the feasibility of partial self-insurance options such as risk pooling and purchasing preferred premium plans. Finally, small firms should investigate the cost savings that can be realized through the use of alternative health care delivery systems such as HMOs and PPOs. Today, competition is reshaping the health care industry by creating more options and rewarding efficiency. The prospect of steadily rising prices and more choices makes it essential that small employers become prudent purchasers of employee health benefits. For American businesses, the issue is crucial. Unless firms can control health care costs, they will have to keep boosting the prices of their goods and services and thus become less competitive in the global marketplace. In that event, many workers will face a prospect even more grim than rising medical premiums: losing their jobs.     

Using Medicaid/SCHIP to insure working families: the Massachusetts experience

Massachusetts was the first State to implement a premium subsidy program for employer-sponsored health insurance, using both Medicaid and State Children's Health Insurance Program (SCHIP) funding. The Insurance Partnership (IP) provides subsidies directly to small employers, and the Premium Assistance Program provides subsidies to their low-income employees. Approximately 3,500 small firms currently participate, most of them offering health insurance coverage for the first time. Approximately 10,000 adults and children are covered through the program, the majority of whom had been uninsured prior to enrolling. Massachusetts' successful experience with premium subsidies offers important lessons for other States wishing to implement similar programs.     

Employer Health Insurance Offerings and Employee Enrollment Decisions

Objective. To determine how the characteristics of the health benefits offered by employers affect worker insurance coverage decisions.
Data Sources. The 1996–1997 and the 1998–1999 rounds of the nationally representative Community Tracking Study Household Survey.
Study Design. We use multinomial logistic regression to analyze the choice between own-employer coverage, alternative source coverage, and no coverage among employees offered health insurance by their employer. The key explanatory variables are the types of health plans offered and the net premium offered. The models include controls for personal, health plan, and job characteristics.
Principal Findings. When an employer offers only a health maintenance organization married employees are more likely to decline coverage from their employer and take-up another offer (odds ratio (OR)=1.27, p <.001), while singles are more likely to accept the coverage offered by their employer and less likely to be uninsured (OR=0.650, p <.001). Higher net premiums increase the odds of declining the coverage offered by an employer and remaining uninsured for both married (OR=1.023, p <.01) and single (OR=1.035, p <.001) workers.
Conclusions. The type of health plan coverage an employer offers affects whether its employees take-up insurance, but has a smaller effect on overall coverage rates for workers and their families because of the availability of alternative sources of coverage. Relative to offering only a non-HMO plan, employers offering only an HMO may reduce take-up among those with alternative sources of coverage, but increase take-up among those who would otherwise go uninsured. By modeling the possibility of take-up through the health insurance offers from the employer of the spouse, the decline in coverage rates from higher net premiums is less than previous estimates.     

Employer-sponsored health insurance and mandated benefit laws

Regulations for the content of private health plans, called mandated benefit laws, are widespread and growing in the United States, at both state and federal levels. Three aspects of these laws are examined: their current scope; some economic reasons for their existence; and the theory and empirical evidence for their effects in health insurance markets. A growing body of literature suggests that society is paying a high price for enhanced coverage via mandated benefits. These laws increase insurance premiums, cause declines in wages and other fringe benefits, and lead some employers and their workers to forgo health benefits altogether. The cost of mandated benefit laws falls disproportionately on workers in small firms.     

Between a rock and a hard place: understanding the employer mind-set

Large and mid-size employers are "between a rock and hard place" when it comes to health benefits: They are both unable to manage their health care costs effectively or simply get out of offering these benefits entirely. Although there is considerable diversity in how employers approach health care, several goals underlie most of their decisions. It is unlikely that the current round of employer-based health initiatives will succeed at managing rising costs. As a result, employers are likely to become more interested than at any time in the past decade in exiting their roles as providers of health benefits.     

Private payers of health care in Brazil: characteristics, costs and coverage

The private sector is the predominant provider of health care in Brazil, particularly for inpatient services, and financing is a mix of public (through a prospective reimbursement system) and private. Roughly a quarter of the population has private insurance coverage, reflecting rapid growth in the past decade fuelled by the crisis in the public reimbursement system and the perceived deterioration of publicly provided care. Four major forms of insurance exist: (1) prepaid group practice; (2) medical cooperatives, physician owned and operated preferred provider organizations; (3) company health plans where employers ensure employee access to services under various types of arrangements from direct provision to purchasing of private services; and (4) health indemnity insurance. Each type of plan includes a wide variety of subplans from basic individual/family coverage to comprehensive executive coverage. The paper discusses the characteristics, costs and utilization patterns of all types of privately financed care, as well as the major problems associated with private financing: the limited package of benefits and low payout ceilings, inadequate consumer information and virtually no regulation.     

Trends in employer-sponsored health insurance coverage for tobacco-dependence treatments

BACKGROUND: Nearly 1.8 million smokers in California receive their health insurance benefits through their employer. The extent to which these workers have coverage for tobacco-dependence treatments (TDTs) through their employer-sponsored health care is unknown. METHODS: This research used the 2000 and 2005 data from the California Employer Health Benefits Surveys to determine coverage for TDTs by private firms. The overall response rates of firms to the survey were 41% and 36%, respectively. The samples used in this analysis are limited to private firms in California that offered employee health benefits in 2000 (n=729) or in 2005 (n=745). RESULTS: This research found that among private firms offering health insurance coverage, there was a significant increase from 2000 to 2005 in the percentage of workers covered for any TDTs (44% to 57%). Rates of coverage for all three forms of TDTs (nicotine replacement therapy, Zyban((R)), counseling) doubled from 11% to 22% over the 5-year time period. CONCLUSIONS: Although coverage levels have improved, they still fall short of the recommendations made in the U.S. Public Health Service guidelines as well as in the Healthy People 2010 objectives. Given the effectiveness, cost effectiveness, public demand for coverage, and relatively low cost of covering TDTs-estimated to be $3-$6 per member per year-it is difficult to understand why such coverage is not more widely available in California.