Employer-paid Health Insurance Research Articles

Incentives for voluntary health insurance in a national health system: Evidence from Italy

ObjectivesThe paper evaluates the extent to which the government's policy to encourage the purchase of voluntary health insurance (VHI) may have led to income-related horizontal inequity in access to health care in a universal health care system (NHS). MethodsAd hoc tax return data for the universe of Italian taxpayers for years 2009-2016 are used to estimate the tax benefits granted to taxpayers who hold VHI, the redistributive impact, and the public budget effect. The income elasticity of tax benefits is estimated using tax return data and considering some taxpayers’ characteristics (income class, gender, age, and geographic area). Standard inequality indices are computed to assess income-related horizontal inequity in access to health care. ResultsTax incentives, especially those granted to employer-paid health insurance, have a sizeable impact on tax revenue and introduce into the Italian NHS significant income-related horizontal and vertical inequity in access to health care. The results suggest a distributional profile of tax incentives that is highly concentrated in favor of wealthier taxpayers. ConclusionOur analysis adds novel evidence that may contribute to the current debate on whether and to what extent countries in which all citizens have access to free healthcare and equal standards of healthcare services should subsidize VHI, especially when the coverage doubles the healthcare services provided by universal public insurance. We show that VHI reduces tax revenues and introduces disparities among citizens in terms of access to healthcare services.

The Relationship between Employer-Paid Health Insurance and Job-Change Among People with Disabilities

Objective: This research investigates the role of employer-paid health insurance (EHI) in reducing job-change probabilities among workers with disabilities. Methods: With an analytical sample of 42,158, this analysis utilizes multiple panels of the Medical Expenditure Panel Survey spanning the years 2004 through 2009. Findings: Overall, workers without EHI are 2.9 times more likely to change jobs than those with EHI and workers with disabilities are 1.4 times more likely to change jobs compared to their counterparts. The EHI and disability status interact synergistically; employees with disabilities without EHI are 4 times more likely to change jobs than their peers without disabilities who receive EHI. Compared to this, workers without disabilities who do not receive EHI are 3.5 times more likely to change jobs than their peers who receive EHI. Conclusion: These findings have implications for employers as they consider changes to their benefit packages with full implementation of the Affordable Care Act, especially concerning its impact on tenure of workers seasoned workers with disabilities.

To what extent does employer-paid health insurance reduce the use of public hospitals?

ObjectiveThis study examines the extent to which employer-paid health insurance has led to substitution of public with private hospital use in Denmark. MethodsIndividual-person-level data for the entire Danish privately employed, full-time working population is used in an observational design. The effect of having employer-paid health insurance on the utilisation of public hospitals is estimated using propensity score matching in order to control for risk selection, based on a number of individual- and company-level characteristics. The outcome is defined as the total consumption of health care services provided by public hospitals. ResultsThe effect of employer-paid health insurance is estimated to correspond to a significant 10% reduction in the total use of public hospitals. The effect appears to be robust to alternative methodological specifications and is supported from the analysis of alternative outcome measures. ConclusionThe rise in the number of individuals with employer-paid health insurance seems to have alleviated the pressure on public hospitals in Denmark. Future studies should confirm the magnitude of this effect, preferably based on empirical data with repeated measurements of insurance status.

Determinants for employer-paid health insurance coverage: a population-based study of the Danish labour force

In 2002, the Danish tax law was changed, giving employees a tax exemption on supplemental, employer-paid health insurance. This might have conflicted with one of the key foundations of the healthcare system, namely equal access for equal needs. The aim of this study was to investigate determinants for employer-paid health insurance coverage. Because the policy change affected only people who were part of the labour force and because the public sector at that time had no tradition of providing fringe benefits, the analysis was restricted to the private labour force. The analysis was based on data from a range of Danish person-level and company-level registers (explanatory variables). These data were combined with information on insurance status obtained from the trade organisation for insurance (dependent variable). A logistic regression was performed to estimate the odds of having employer-paid health insurance coverage. The individuals who were most likely to be insured were those employed in foreign companies as mid-level managers within the field of building and construction. Other important variables were the number of persons employed in a company, gender, ethnicity, region of residence, years of education, and annual income. Both company and individual characteristics were found to be important and significant predictors for employer-paid health insurance coverage. The Danish tax exemption on private health insurance in the years 2002-12 thus seems to have led to inequality in employer-paid health insurance coverage.

The Regressivity of Taxing Employer-Paid Health Insurance

Many health economists, ranging from Democratic advisor Jonathan Gruber1 to the Heritage Foundation,2 have argued that tax subsidies for employer-paid health insurance encourage over-insurance and are highly regressive, directed mainly to higher-income families. We beg to differ. The subsidies meet the usual definition of progressivity: they taper down (as a percentage of income) as income rises. Ending them would inflict a regressive tax increase, taking a larger share of income from insured near-poor and middle-class families than from the wealthy. The confusion may arise from the dazzlingly large sums that high-income families gain from these tax subsidies. According to a . . .

The President's Proposed Standard Deduction for Health Insurance: Evaluation and Recommendations

The President's proposal to replace the current exclusion of employer-paid health insurance premiums with a standard deduction for qualifying health insurance would level the playing field for employment-based coverage and private plans but would risk the loss of insurance for many workers, threaten existing risksharing pools, and unfairly favor the wealthy. This paper evaluates the President's plan, suggests changes that would improve it, and assesses alternatives that would address the plan's shortcomings and improve its likelihood of expanding coverage to many families who now lack insurance.

Tax subsidies for private health insurance.

The exclusion from income and payroll taxes for employer-paid health insurance premiums amounted to more than $240 billion in 2010. As policy-makers search for ways to pay for health care reform and contain health care costs, this exclusion is coming under scrutiny, despite the fact that employee-sponsored insurance (ESI) is an integral part of the health insurance system. This update of a 2003 synthesis looks at the tax subsidy for private health insurance. Key findings include: The current tax subsidy benefits higher-income workers the most. The tax exclusion is worth more to those in higher tax brackets, higher-income workers are three times more likely to work for firms who offer ESI than lower-income workers, and they are more likely to purchase ESI when offered because they can afford it. Families earning $10,000 to $20,000 annually spend more than 25 percent of their income on health insurance but the value of their tax subsidy is only $1,500. By contrast, earners over $200,000 spend less than 5 percent on health insurance but their benefit is worth $4,500. Workers who cannot afford ESI or are ineligible, including the self-employed and many part-time workers, do not receive this subsidy when they purchase private, non-group coverage.

Changes in Health Insurance and Payment for Substance Use Treatment

Based on data from the National Household Survey on Drug Abuse in 1994 (N=10,158) and 1998 (N=12,892) alcohol- or drug-using subsamples (aged 18–64) were compared to see if postwelfarereform reports of having employer-paid health insurance increased and Medicaid decreased by 1998 and affected participation in substance use treatment. By 1998, respondents were more likely to report having employer-paid insurance but reported source of payment for substance use treatment did not differ by year. In 1998, privately insured respondents were less likely to know if they had coverage for substance use treatment than in 1994. Of privately insured in treatment, 24% did not know if insurance covered treatment; most of these said they paid for treatment out-of-pocket. Despite reported increases in employer-paid insurance, uncertainty about its coverage of substance use treatment also increased and was associated with reports of not using it to pay for treatment.

Data Show Employers How Health Affects Bottom Line

Back to table of contents Previous article Next article Health Care EconomicsFull AccessData Show Employers How Health Affects Bottom LineKate MulliganKate MulliganSearch for more papers by this authorPublished Online:17 May 2002https://doi.org/10.1176/pn.37.10.0017Efforts to show the impact of employees’ health on corporate profits are becoming more sophisticated in the face of escalating health care costs and an uncertain economy.In April the Center on Drugs and Public Policy of the University of Maryland School of Pharmacy convened health care researchers, corporate consultants, and human resource directors to consider “Healthcare Financing in the 21st Century: Cost Implications for Employers, Insurers, and Policymakers” (Original article: see facing page).Debra Gold, principal of the Health Care and Group Benefits practice of William M. Mercer Inc., offered an overview of reasons why employers sometimes resist examining how an investment in health affects their profits.“Health is not our business” is the message she frequently hears from corporate executives. Investments in the “operations” side of a company yield clear and tangible benefits, whereas the results of investments in human resources are “squishy” and hard to measure (Psychiatric News, May 3).Gold maintained, however, that studies are revealing that common health risk factors can be linked to increased costs for a corporation. She cited data, for example, that showed a smoker, on average, annually costs an employer $7,064 in sick days, cigarette breaks, added cleaning, increased property loss and burn damage, and employer-paid health insurance premiums, compared with $1,977 for a nonsmoker.Making the Case for Treating DepressionStudies have demonstrated that untreated depression can be particularly costly for employers, according to Gold. She cited a paper in the March 2001 Journal of Occupational and Environmental Medicine showing that 16.5 percent of the working population is affected by major depression. “Days impaired” per 1,000 employees due to major depression are 709, according to the study.Gold also reported on a study in the May-June 2000 General Hospital Psychiatry that found that recovery from depression is associated with significant reductions in work disability and possible reductions in health care costs.Further support for this view appears in “The Business Case for Quality Mental Health Services: Why Employers Should Care About the Mental Health and Well-Being of Their Employees” in the April Journal of Occupational and Environmental Medicine. That paper reviews the literature about employee depression and its impact on business.Lloyd Sederer, M.D., director of APA’s Division of Clinical Services and an author of the paper, told Psychiatric News, “We found growing evidence that productivity improvements occur as a consequence of effective depression treatment, and those improvements may offset the cost of the treatment.”Ronald Kessler, a professor of health care policy at Harvard Medical School, described strategies for persuading companies to pay for the treatment of depression and other illnesses.“Employers will be most likely to invest in the treatment of commonly occurring illnesses associated with substantial work impairment,” he said. Kessler cited depression and low back pain as examples.He added that depression is particularly likely to have ripple effects on other employees. “One employee who is depressed can affect 20 coworkers,” he said.Kessler cautioned the audience to consider the kind of evidence that is respected by corporate executives. “We need a standard of proof that can be grasped quickly,” he said. For example, companies greatly increased on-site provision of flu shots the year following a severe flu epidemic.Next Steps for ResearchersKessler recommended that researchers undertake “low-tech studies in lots of little places” that focus on illnesses, such as depression and allergies, with a high impact on productivity.He told the audience that the National Institute of Mental Health is in the final stages of consideration of a research proposal to evaluate the impact of outreach and treatment of depression on work behavior in a sample of employed people.Sederer, who will be an investigator on the project, said, “The proposal is notable because treatment would be provided by psychiatrists and other mental health specialists, rather than by primary care doctors. Treatment would be consistent with APA’s practice guidelines for depression.”Principal investigator Philip S. Wang, M.D., of the department of medicine at Harvard Medical School, told Psychiatric News, “Other important aspects of the proposal are its use of cost-benefit analysis to estimate the net benefit of the program to employers and its potential to promote rapid and widespread dissemination of good treatment for depression.”If the results appear beneficial to employers, United Behavioral Health, a partner in the study, would be able to disseminate findings quickly and credibly to its clients. ▪ ISSUES NewArchived

Waiting for Godot: wishes and worries in managed care.

Managed care has done a better job at reducing expenditure growth than it has in improving quality. Although reduced expenditure growth is not appreciated by many, it has real benefits. For the majority of Americans who are privately insured, it results in greater disposable income for goods and services other than health care (although the illusion of employer-paid health insurance obscures this reality for many). For Medicaid programs, slower growth of expenditures facilitates efforts at expanding coverage. For low-income workers, slower expenditure growth results in larger numbers of people retaining insurance coverage than would have been the case if premiums rose more quickly. While there are some victories to which managed care organizations can point, we cannot credibly argue that overall levels of quality and health outcomes are improving as the health care system is massively disrupted by changes in health care finance and delivery. The disruptions create real hardships for some physicians and other health care workers, and worries for many consumers. These worries fuel the managed care backlash. The danger is that politicians will respond to these worries with policies that inhibit the development of high-quality delivery systems. The opportunity is for relatively modest public policy changes--external review organizations, better public-sector purchasing capabilities, public investment in producing and publicizing information on health plan and medical group performance, and establishment of a public ombudsperson--to respond to consumer worries and lead to improvements in health care quality and outcomes. Finally, I would be remiss without a reminder that the single most effective action politicians could take to improve health care quality and outcomes would be to change the rules of health care financing to assure that all Americans are covered by managed care. Even with all of its inadequacies, managed care is much superior to the patchwork care available to the 43 million Americans who are uninsured. The managed care backlash is concerned with protecting patients who are insured (and their providers). Far more valuable would be to protect those without insurance. Sadly, no politician has yet figured out how to do this. Still waiting.

Market-Based Reform: What to Regulate and by Whom

Prologue: In 1975 the Congressional Budget Office estimated that excluding employer-paid health insurance premiums from federal income and payroll taxes cost the government $6.9 billion in lost revenue. That figure had risen to $25.7 billion in 1983, when Alain Enthoven proposed (in Health Affairs, Spring 1984) to change the tax treatment of employer-provided health insurance. This favorable treatment, Enthoven stated then and still believes today, contributed to the rapid rise in health care spending and has caused major distortions in the health insurance market. In 1995, $90 billion in tax revenues will be lost as a result of the tax treatment of health benefits. The tax-related distortion is but one of several market failures Enthoven and Sara Singer propose to ameliorate by way of managed competition and a structured marketplace for health care. What is needed, they argue, are ways to make health care consumers more price-sensitive and ways to encourage competition among health plans that is not based on avoidance of risk. Even market-based reform requires some regulation, they state clearly, and government must do at least some of this regulation. The future competitive market could be composed of sponsored groups or individually owned plans. Sponsors can help to ensure competition and avoid adverse selection within their groups. The more the market relies on sponsored groups, the less it will be necessary to rely on government regulation. Enthoven, who received his doctorate in economics from the Massachusetts Institute of Technology, is Marriner S. Eccles Professor of Public and Private Management at the Stanford Graduate School of Business and professor of health research at the Stanford School of Medicine. Singer, who holds a master of business administration degree from Stanford, is Enthoven's special assistant. Invited perspectives from William L. Roper and Helen Darling follow their paper.

The Un-Managed Competition Revolution

Health care executives' attention is focused on President Clinton's recently introduced health care reform proposal. Most are wondering whether Congress will pass it and if so, what it will mean for their health care facilities, not to mention their careers. But this highly visible public theater is obscuring the fact that the federal government has already implemented a more subtle variety of health care reform that is unleashing a competitive revolution in health care that will rapidly restructure the U.S. health care delivery system. Like most revolutions, this one will be turbulent; it will also have profoundly negative consequences for health care executives who are not prepared to manage it effectively. Furthermore, should the competitive forces it unleashes disrupt coverage and access for important segments of the American public, it could produce a counter-revolution aimed at restoring order, fairness, and simplicity to U.S. health care through the adoption of a single-payer system. The foundations of this quiet health care revolution were laid in 1982 when the federal government stopped reimbursing hospitals retrospectively for their Medicare costs and started paying them on a predetermined, fixed price basis. This change provided the federal government with a powerful budgetary device for shifting more of the economic risk of treating elderly patients to the hospitals that serve them. Since 1983, Congress and the president have used this fiscal tool to produce large annual budget savings by reducing the rate of growth in Medicare hospital payments. Hospitals initially responded to this development by cutting their costs. But once they achieved the easy savings, most resorted to cost-shifting-that is, using higher hospital prices to transfer the shortfalls in Medicare payments (along with losses from treating uninsured and Medicaid patients) to local employers. In the process of doing so, they contributed to an exponential growth in employer-paid health insurance premiums. Between 1987 and 1990, Medicare per capita expenditures rose at a 9.7 percent annual rate, while employer per capita health insurance costs accelerated at a much brisker 16.5 percent per year. In effect, the cost-shift functioned as an economic safety valve enabling most hospitals to weather large public program reductions, as well as losses from the growing uninsured population, by shifting those losses to employers. As a result of federal budgetary actions in 1990 and 1993, the cost-shift will continue to grow. During those years, the federal government reduced Medicare and Medicaid expenditures by another $43 billion and $63 billion, respectively. As long as the federal deficit remains high, additional large Medicare and Medicaid reductions are likely--with or without systemic health care reform. Since no business, however efficient, can sustain a large area of uncontrolled expense, employers are unlikely to absorb these latest cuts in the form of higher premium payments. Indeed, employers have been taking a series of ever more aggressive actions to shield their balance sheets from the full brunt of escalating health insurance costs. Their first line of defense has been to shift some of the higher hospital charges to their employees through slower wage growth, increased copayments and deductibles, premium sharing, and in some instances, reduced or eliminated health benefits. However, the need to maintain employee morale in most businesses and union-negotiated contracts in others have placed clear limits on this approach to control costs. Many employers are now attempting to build a firewall between themselves and the rising cost-shift by placing a growing number of their employees in tightly controlled managed care plans. These organizations attempt to slow premium cost increases through the use of limited panels of physicians, exacting utilization standards, and large provider discounts. As managed care plans become more effective at resisting the cost-shift and as government continues to restrain the rate of growth in public program payments to health care providers, hospitals will be forced to go out of business or become more productive through stringent cost-cutting, consolidation with other providers, and eventually the clinical and financial integration of services. …

The Incidence of Mandated Employer-Provided Insurance: Lessons from Workers' Compensation Insurance

Workers' compensation insurance provides cash payments and medical benefits to workers who incur a work-related injury or illness. Many features of the workers' compensation program parallel features of proposed mandated employer-paid health insurance plans. This paper empirically examines the incidence of the workers' compensation program to infer the likely consequences of mandated health insurance proposals. In certain industries, such as trucking and carpentry, workers' compensation insurance costs are quite large, and vary tremendously within states over time, and across states at a moment in time. This variation is used to identify the incidence of the program. Empirical analysis of two data sets suggests that changes in employers' costs of workers' compensation insurance are largely shifted to employees in the form of lower wages. In addition, higher insurance costs are found to have a negative but statistically insignificant effect on employment. The implied elasticity of labor demand from our results is about -.50.

Taxing Health Insurance: Effects on Employees in Firms with Older Workforces

Congress continues to consider whether to tax employer-paid health insurance benefits to raise revenues and reduce “unnecessary” health care utilization. One argument against such a tax is that it would disproportionately affect employee groups with concentrations of older workers because those groups have a higher actuarial cost for any given level of health coverage. This study estimates tax liabilities for taxpayers in young versus older employee groups with the same prototypical health coverage in 36 geographic areas. Liabilities are computed for the two most discussed policy options: taxing the entire health premium, and taxing any premium above a “cap.” If all health benefits were taxed, 1987 tax liability differences due solely to average age of employment group would be up to $613.20 for families in the z8% marginal tax bracket and $328.50 in the I 5% bracket. If health benefits were taxed above a cap of $3,600 for families, tax liability differences would be as high as $600.04 for families in the 28% bracket and $321.45 in the i5% bracket. Therefore, both policy options would result in substantially higher tax liability for taxpayers employed in older-than-average employment groups. Policy implications and potential behavioral responses to taxation are discussed.