The question of healthcare insurance and cost sharing has been plaguing employers for some time. Their aim is a balance between providing employees with enough healthcare and decreasing the expenses. In order to determine an effective strategy for an employer in this respect, it seems advisable to study relevant literature.
Manning et al. (1987) analyzed the connection between medical insurance and welfare loss proving it to be noticeable. At the same time, the authors were pointing out that a substantial decrease in hospital days can be achieved with the help of insurance cost sharing. It appears that this correlation should be taken into account. In fact, it seems that the Manning et al. (1987) advocated employer participation in health insurance. Given the fact that human resources are among the most valuable resources of a company, this appears to be understandable.
Still, it should be pointed out that Manning et al. (1987) describe the changes in the healthcare environment that took place more than half a century ago. Nowadays the situation has changed, one of these changes being the introduction of Obamacare in 2010 (Christianson, Tu, & Samuel, 2011, p. 5). Analyzing the prevalent strategy of insurance participation nowadays could help us make conclusions about possible recommendations on the matter.
The article by Christianson, Tu and Samuel (2011) contains information on the strategies that companies would usually take just a year after Obamacare was launched. According to the authors, at the time the rising costs of healthcare encouraged companies (especially smaller ones) to increase the employee share of the costs. This tendency has been demonstrated in other studies as well. For instance, the research by Liu and Jin (2015) proves that the employer participation in healthcare insurance makes employees less sensitive to costs, which results in the growth of the company’s expenditures. As a result, employers are often reluctant to participate in insurance programs, especially when they can be called governmental. Consequently, they search for alternatives. According to Miller, Eibner and Gresenz (2013) “the majority of individuals who receive health insurance coverage through an employer are in a self-insured plan” (p. 45). Such programs are more convenient for the company since they are not always regulated by Affordable Care Act (ACA) and, therefore, provide more room for regulatory arbitrage. Apart from that, the authors have found out that this kind of health insurance does not appear to correlate with poorer healthcare quality, which makes it a reasonable alternative that is attractive to employers. At the same time, self-insured plans are concerned with higher financial risks (Miller et al., 36). Those can be mitigated with the help of loss coverage plan, even though not every employer decides to provide one.
Therefore, the prevalent strategy of employers nowadays consists in decreasing their health insurance participation and attempting to ensure having more room for arbitrage. At the same time, Christianson et al. (2011) point out that welfare programs gained popularity. Moreover, according to the authors, employers tended to increase or decrease their participation in the cost sharing as a part of their incentive or penalties programs. In fact, this appears to be a very sound strategy, and this kind of motivation seems to have a tremendous potential. Indeed, it can stimulate the employees to work harder for non-monetary but potentially very valuable rewards. Apart from that, the penalty increase of workers’ share in the health insurance is quite punishing.
It should be pointed out that employer insurance strategies are most various. Christianson et al. (2011) recognize that the policies of the companies can be quite diverse due to the diversity of their size, income, or culture. Indeed, one may presume that a number of factors can influence the insurance policy of an employee. Still, turning insurance costs sharing into a part of incentives programs appears to be a reasonable and, possibly, most effective employer strategy that allows one to reach the aim of balance.
References
Christianson, J., Tu, H., & Samuel, D. (2011). Employer-Sponsored Health Insurance: Down but not out. Issue Brief, 137, 1-5.
Liu, Y., & Jin, G. (2015). Employer Contribution and Premium Growth in Health Insurance. Journal of Health Economics, 39, 228-247. Web.
Manning, W.G., Newhouse, J.P., Duan, N., Keeler, E., Benjamin, B., Leibowitz, A., …Zwanziger, J. (1987). Health Insurance and the Demand for Medical Care: Evidence from a Randomized Experiment. The American Economic Review, 77: 251-277.
Miller, A., Eibner, C., & Gresenz, C. (2013). Financing of Employer Sponsored Health Insurance Plans before and after Health Reform: What Consumers don’t Know won’t Hurt Them?. International Review of Law And Economics, 36, 36-47. Web.