Health Affairs, 25, no. 6 (2006): 1668-1678 doi: 10.1377/hlthaff.25.6.1668 © 2006 by Project HOPE	New Online   Senate Health Reform Bill   Rewarding Providers   Public Option Policy Brief   Health Reform & Abortion   Delivery System Reform

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DataWatch

Employers’ Views On Incremental Measures To Expand Health Coverage

Abstract

 
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.

This paper sheds light on employers’ views of the importance of health benefits and their perspectives on policies aimed at expanding coverage. Incremental expansion strategies include those that would require administrative actions on the part of employers and those that would involve a greater financial commitment. This study builds on previous surveys of employers’ views of health benefits in the workplace and of employers’ roles in an expanded coverage system.²

Study Data And Methods

Top Study Data And Methods Study Results: Employers' Views Discussion NOTES

 
Data. Data are from the 2005 annual Survey of Employer-sponsored Health Benefits conducted by the Henry J. Kaiser Family Foundation and the Health Research and Educational Trust (Kaiser/HRET), with a supplement on employers’ views of policy strategies sponsored by the Commonwealth Fund. The survey draws its sample from a listing of U.S. firms compiled by Dun and Bradstreet, with employers ranging in size from three to hundreds of thousands of workers. The sample includes public and private firms and is stratified by size and industry.

Using computer-assisted telephone interviewing, National Research LLC, a Washington-based survey firm, interviewed employee benefit managers during January–May 2005. The survey reports findings from a telephone survey of 2,995 randomly selected public and private nonfederal employers, including 2,013 who responded to the full survey and an additional 982 who responded to one question about whether or not they provide health coverage to their employees. The overall response rate for the survey was 48 percent.

Survey questions. Employers were asked their views of the importance of health benefits in improving the health and productivity of their workforce and in recruitment and retention. We then asked a series of questions regarding public policies to increase workers’ insurance coverage. These included limited approaches that would not require major financial commitments, such as providing employees with information about state public insurance programs, making payroll deductions for employee premiums in state public insurance programs, reducing an employee’s withholding tax by the amount of a government-provided tax credit, applying an employee’s tax credit to his or her share of the employer’s premium cost, and federal premium assistance for Consolidated Omnibus Budget Reconciliation Act (COBRA) continuation coverage. Most of these changes would require new legislation.

We also elicited employers’ views on coverage expansion strategies that would require more financial commitment on their part (changes that would also require new legislation). These included requiring employers to offer coverage or pay into a fund to cover uninsured workers, allowing employers to finance part of their employees’ premiums for coverage through state public insurance programs or state or federal employee health benefit programs, and partly financing government-provided reinsurance. Finally, we asked employers for their views on strategies to lower the costs of administering health benefits and their interest in providing more restricted but higher-quality and lower-cost provider networks.

Analysis. Because firms are selected randomly, statistical weights can be used to calculate national, regional, industry, firm-size, and other averages. To calculate weights, a basic weight is first determined, then a nonresponse adjustment is applied, and then finally a post-stratification adjustment is made. Statistics of U.S. Businesses, compiled by the U.S. Census Bureau, are the basis for the stratification and post-stratification adjustment for firms in the private sector, while the Census of U.S. Governments serves as the basis for the public sector.

With the firm as the unit of analysis, all results in this paper are "worker weighted."³ For clarity, when reporting survey results, we use the term "percentage of firms" rather than the more cumbersome (and accurate) term, "percentage of workers in firms." Why are worker weights used? Firms with 3–24 workers constitute 83 percent of all firms but account for just 19 percent of employees. Hence, when using employer weights, we would essentially report the views of firms with 3–24 workers. Firms with 5,000 or more workers (which account for 34 percent of workers) would constitute 0.1 percent of the total weight and would essentially have no effect in the analysis. All results shown in the exhibits are tested for statistical significance at the .05 level using the chi-square test.

Study Results: Employers’ Views

Top Study Data And Methods Study Results: Employers' Views Discussion NOTES

 
Value of health benefits. The survey queried firms that offered health benefits in 2005 on the importance of these benefits in a number of areas, such as attracting highly qualified employees. The majority of employers, both small and large, value health benefits for myriad reasons (Exhibit 1). All but 5 percent of firms indicated that health benefits were very or somewhat important in improving employees’ morale; a similar percentage said that health benefits were very or somewhat important in improving employees’ health. Most employers view benefits as important in recruiting and retaining highly qualified employees. Small firms placed as much importance on benefits as large firms did.

View larger version (19K): [in this window] [in a new window] EXHIBIT 2 Employers’ Responses To Question Of Whether Or Not Employers Should Share The Cost Of Employee Health Coverage

The survey also asked whether employers would support new federal legislation that would pay 60–75 percent of the premium for former workers who participate in COBRA continuation coverage, with companies continuing to help administer the plans. Among firms offering health benefits, just under half said that they would be very or somewhat supportive of this. This measure garnered much less support than the other "administrative action" reforms discussed in the survey (Exhibit 3). One factor explaining the lower support is that many employers perceive that an expanded COBRA program will cost them money, so that it becomes more than an administrative initiative. Employers sense that an expanded COBRA program would reduce firms’ net income, because people who elect COBRA coverage tend to incur claims expenses roughly 50 percent greater than the average for an employer group, while payments are just 102 percent of premiums.⁵ Small employers, however, were significantly more likely than larger firms to be either very or somewhat supportive of such legislation.

Strategies that would require employers’ financial contributions. Employers were asked about their interest in providing two new group insurance options for their workers, with employers paying part of the premium. The first option would allow employers to cover employees and their dependents through the same insurance program that covers their state’s public employees or the federal insurance program that covers members of the U.S. Congress, with employers paying at least part of the monthly premium. Half of firms (both offering and nonoffering firms) were very or somewhat interested in having this option available (Exhibit 4). Small employers were significantly more likely than larger employers to express interest in such an option, and firms not currently offering health insurance were more likely than offering firms to support the notion.

Finally, companies were asked how important they thought it was that the federal government offer reinsurance to protect employers against catastrophic health care costs above a certain threshold, even if employers had to pay part of the cost. Among firms both offering and not offering health benefits, nearly two-thirds said that it was very or somewhat important (Exhibit 4). Small firms were significantly more likely than larger firms to view this reform as important.

Strategies to improve quality and reduce benefit costs. The survey examined employers’ views of changes in benefit design that might improve the quality of care or simplify the administration of insurance. Employers were asked how interested they would be in offering high-performance provider networks to their employees, which would include providers known to deliver higher-quality care at a lower cost for a given episode of care, even if it meant that employees might have a smaller number of providers to choose from (Exhibit 5). Among firms offering health benefits, 63 percent indicated that they were very or somewhat interested in offering such a network. Smaller firms, which generally offer one plan, were significantly less likely than larger firms to express a strong interest in such networks.

Employers’ views of which strategies would be the most beneficial were fairly evenly divided across the five measures, but those that standardized aspects of benefits were viewed as somewhat more beneficial than arrangements to jointly purchase insurance, especially among large employers (Exhibit 6). One-quarter of large firms said that universally accepted quality performance measures for providers would be the most beneficial in reducing administrative costs. Small firms rated standardization of health benefits and joint purchasing of health benefits as most beneficial. Small firms were more likely than large firms to identify joint benefit purchasing by employers and public programs as most beneficial.

Top Study Data And Methods Study Results: Employers' Views Discussion NOTES

If current trends continue, employers that offer coverage will increasingly cover workers (spouses) employed elsewhere, especially those employed in small firms. In the midst of rapid premium growth, the share of U.S. companies that offer health insurance fell from 69 percent in 2000 to 60 percent in 2005.⁸ This steady five-year decline was largely driven by a sharp decrease in the share of small firms that offer coverage. Among businesses with 3–9 employees, 47 percent offered health insurance in 2005, down from 58 percent in 2000.⁹ Although there are uninsured workers in companies of all sizes, about 60 percent of U.S. workers without insurance work for businesses with fewer than 100 employees.¹⁰

The challenge that small employers face in offering affordable coverage to their employees is reflected in their support for several new strategies to expand coverage to working families explored in this survey. Majorities of large employers were open to new policy options to cover more workers; however, they appeared to be somewhat more comfortable with the status quo. Small employers, in contrast, were far more willing than larger employers to test new strategies to expand coverage and reduce the costs of providing insurance.

Employers of all sizes expressed the strongest support for new options that would require minor administrative adjustments, and interest levels were highest among small employers. These changes included making payroll deductions for premiums on behalf of workers eligible to participate in public insurance programs or applying a worker’s federal tax credit for health insurance to his or her premium. One exception, however, was very limited support for federal legislation to subsidize former employees’ COBRA premiums, with employers continuing to administer the plan. This could stem from employers’ negative views due to problems with adverse selection and administrative costs associated with COBRA.

Relative to the support for policies that would require administrative actions, a much smaller majority of employers were interested in policy options that would involve a greater financial commitment on their part. Like the administrative policy changes, however, interest was higher among small employers. These new options included offering and partly subsidizing employees’ coverage through state or federal employee benefit programs or state public insurance programs. There was majority agreement that the federal government should offer reinsurance, with employers paying part of the cost, but the level of support also was lower than that for more minor administrative actions.

There is an important caveat to the preceding observations. For most administrative and financial initiatives, the majority of support is from employers that are somewhat rather than very supportive of the specific proposal. Presumably, these employers are neither very committed or enthusiastic about the initiative but lean in support "a little" or "to some degree." In the course of a political debate, these employers might change from supportive to opposed to the proposal.

In matters of quality improvement and reducing administrative costs, small employers were more focused on immediate relief from costs and somewhat less concerned about improving quality of care than large employers were. For example, there was substantial interest on the part of large employers, especially among very large employers, in altering benefit design to encourage higher-quality care from providers and to standardize the reporting of quality information by providers. Small employers were somewhat less interested in encouraging higher quality through benefit design changes and placed relatively more importance on new purchasing arrangements aimed at lowering their health insurance costs. For example, small employers were more likely to say that the best way to achieve greater efficiency in administering health benefits was having the ability to jointly purchase health insurance with other employers and public insurance programs, and by standardizing health benefits. Small firms’ lower enthusiasm for high-performance networks might also reflect the aftermath of the "managed care backlash." Researchers have found that employees who worked for firms not offering a choice of plans had stronger antipathy to managed care.¹¹ Moreover, large firms hire specialists in health benefits, whereas small firms might lack such a specialist. This may further explain the higher interest among large firms in high-performance networks.

POLICYMAKERS WHO ARE HOPING FOR A continued employer role in U.S. health coverage should be somewhat encouraged by the findings we have reported here. Rather than begging to get out of the game, employers appear willing to at least consider small changes that might make it easier to stay in.

Editor's Notes

 
Heidi Whitmore (hwhitmore{at}hschange.org) is a researcher at the Center for Studying Health System Change (HSC) in Washington, D.C. Sara Collins is an assistant vice president at the Commonwealth Fund in New York City. Jon Gabel is a vice president of HSC; Jeremy Pickreign is a statistician for HSC, in Rensselaer, New York.

The authors thank the Commonwealth Fund for its financial support. They thank Paul Ginsburg, Cathy Schoen, and Karen Davis for their useful comments. They are most appreciative of the research assistance of Zachary Gochenour and the administrative assistance of Gretchen Nowlin and Laura Rittel.

NOTES

Top Study Data And Methods Study Results: Employers' Views Discussion NOTES

 

1. Congressional Budget Office, The Budget and Economic Outlook: An Update (Washington: CBO, August 2005), 11.
2. S.R. Collins et al., "Job-based Health Insurance in the Balance: Employer Views of Coverage in the Work-place," Issue Brief, March 2004, http://www.cmwf.org/publications/publications_show.htm?doc_id=221573 (accessed 14 August 2006).
3. This weight is calculated as the product of the inverse of the probability of an individual firm’s appearing in the sample (the employer weight) and the number of employees that work at the firm.
4. We note that the question addresses a "principle" rather than an actual "government mandate." It is possible if the wording were changed so as to indicate the employer’s views about a "government mandate," responses might be different.
5. Based on a survey of 180 companies, Charles D. Spencer and Associates found that only about one of every six people who were eligible for COBRA enrolled in the program but that claims expenses per COBRA enrollee are 50 percent greater than for the overall employee population. See USI Consulting Group, "COBRA Participation Declines," Benefits InfoSource (November 2002): 5. Employers may perceive that with greater subsidies, more former employees will take up COBRA, and the firm might realize greater absolute losses on COBRA.
6. Henry J. Kaiser Family Foundation/Health Research and Educational Trust, Employer Health Benefits: 2006 Annual Survey, 26 September 2006, http://www.kff.org/insurance/7527/index.cfm (accessed 28 September 2006).
7. S.R. Collins, K. Davis, and A. Ho, "A Shared Responsibility: U.S. Employers and the Provision of Health Insurance to Employees," Inquiry 42, no. 1 (2005): 6–15.[Web of Science][Medline]
8. J. Gabel et al., "Health Benefits in 2005: Premium Increases Slow Down, Coverage Continues to Erode," Health Affairs 24, no. 5 (2005): 1273–1280.[Abstract/Free Full Text]
9. G. Claxton et al., Employer Health Benefits: 2005 Annual Survey, September 2005, http://www.kff.org/insurance/7315/index.cfm (accessed 14 August 2006).
10. P. Fronstin, "Sources of Health Insurance and Characteristics of the Uninsured: Analysis of the March 2005 Current Population Survey," Issue Brief no. 287 (Washington: Employee Benefit Research Institute, November 2005).
11. A.A. Gawande et al., "Does Dissatisfaction with Health Plans Stem from Having No Choices?" Health Affairs 17, no. 5 (1998): 184–194.[Abstract/Free Full Text]

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