There has been a growing interest in the study of employee health benefits in the last few years, as the financial costs of providing such benefits has escalated at an alarming pace. In 1992, Americans paid 14% of the gross national product (GNP), or 14 cents out of every dollar of national income for health care, and costs are projected to rise to 20% of the GNP by the year 2000 (Star, 1993). The concern over health care costs lies not only at the national level, but at the organizational level, where employers cover almost two-thirds of Americans with health insurance, and shoulder the greatest burden of the health care crisis (Davis, 1991). In addition, a recent report from the Labor Department revealed a 5.5% annual increase in how much employers pay for workers, with the largest part of the increase in payroll costs not going to worker's take-home pay, but to health care coverage (U.S. Bureau of Labor Statistics, 1991). This increase in labor costs is clearly not increased expenditures related to performance.
Effort to contain costs.
Efforts by employers to contain mushrooming health care costs include expanded employee deductibles and co-pays, second surgical opinions, higher employee contributions to premiums, along with aggressive monitoring of the need for certain medical treatments before paying benefits, often requiring preauthorization before treatment (Luthans & Davis, 1990).
While benefit specialists and insurance companies have been closely monitoring cost containment efforts over the past several years, and have extensive data bases of usage patterns and statistics detailing the financial outcomes of the various strategies, research attempting to tap the less concrete, less tangible, human side of cost containment has been virtually nonexistent. Nevertheless, investigation of a nonfinancial nature is important to explore what the human implications have been as a result of the changes. Any yet the human implications do have a cost, as they often result in loss of commitment to the organization, and reduced job satisfaction, which in turn result in costly turnover (Tett & Meyer, 1993).
The application of the social psychology framework for organizational justice is particularly appropriate when viewing cost containment efforts, via the decision making, change and implementation processes involved in organizations. While a significant number of studies have been conducted in government and legal organizations, there is a fair amount of evidence which suggests that distributive and procedural justice theories may be universal in scope and do extend to business settings (Folger & Greenberg, 1985; Kim & Mauborgne, 1993; Niehoff & Moorman, 1993; Sheppard, 1984; Sweeney & McFarlin, 1993). The primary purpose of this study is to determine the correlates of employee health benefit satisfaction via analysis of organizational justice.
Distributive and Procedural Justice
Justice researchers have identified two primary forms of fairness that are relevant to predicting benefit satisfaction. Procedural justice refers to how organizations go about the decision process or the means used to determine resource allocation (Knovsky, 1992). "Fair" procedures are usually those that allow the employee some control over the information being considered. Recent work in the area of procedural justice has shown that perceptions of fair treatment depend on the relative level of the employee's outcomes and on the explanation given for those outcomes (Folger & Bies, 1990; Lind & Tyler, 1988). Perceptions of inequity and the employee's attempt to change the inequity have been reduced when explanations are given that account for the inequity. Employee acceptance of inequity has occurred when employees were assured that top management was sensitive to employee viewpoints and top management communicated their ideas honestly, the decision or procedure was made …