Employer-Sponsored Health Insurance: Effects on Employers and Employees

Article excerpt

ABSTRACT

On average, nearly 11% of the gross payroll or $5,415 is spent on medically related benefits per employee according to a United States Chamber of Commerce Survey in 2003 (U.S. Chamber of Commerce, 2003). The costs to both the employer and employee are constantly rising and debates are ongoing from conference rooms to Congress. Clearly, health insurance is an important area for employer spending and the employee.

This study will discuss the different factors facing employers and employees in medical-related insurance matters. Both employers and employees should be aware the variety of health plans and the possible problems impacting this critical choice.

INTRODUCTION

Participants in the job market look for several factors when considering employment with a particular company. One of the most important issues, besides the salary, is the health benefit package provided by an employer. However, in today's insurance market, employers and employees are facing a crisis. Employers must recognize how heavily employees value health benefits programs. Further, it is imperative that employers and employees be aware of the factors affecting their selections. Health care costs are on the rise, as well as the number of uninsured individuals. Employers have to weigh the many insurance options while accounting for lower-income employees and future retirees.

First, the study will look at a brief overview of some of the available plans. Next, the problems being faced by both the employee and employer are presented along with statistics that provide a image of the current situation. Following will be findings on methods employers are using to weather the health care crisis and other methods for employees to overcome the inherent problems. A brief summary and conclusion highlight the main points of the study.

LITERATURE REVIEW

Very few articles have been written on this subject as it is currently. The available articles emphasized only one particular factor related to this issue in their study. Elswick (2003) studied compensation-based premiums and profiled companies that are more likely to benefit from their use. She also described several well-known companies and their use of the premium program. Geisel (2002a, 2002b) highlighted the troubles with retiree health plans and emphasized the need for employers to support the economy by offering future retirees some variation of a health plan. Harwood (2002) also contributed information about the importance of offering health care coverage to employees. Economic factors and statistical data are presented along with the discussion. Another important work by Greenwald (2003) offers enlightenment in consumer-driven health plans by describing the implementation, advantages, and disadvantages of those plans. Finally, Trombly (2003) discussed various problems with health care, specifically in the distributing industry. However, his information is relevant across other industries.

Definitions

The following terms and phrases are used throughout the study.

Indemnity--This was once the most common form of health insurance
where the employee may use any doctor or hospital at any time and
must pay a "reasonable and customary" charge for such services.

Health Maintenance Organization (HMO)--Usually the least costly option
for employers, it is basically a prepaid health plan providing
comprehensive care for a monthly premium. The insured is limited to
participating doctors and hospitals, and the plan requires the
designation of a primary care provider.

Primary Care Provider (PCP)--A doctor that is specified by the insured
individual to provide service. All referrals to specialists are
handled through the PCP. Most insurance plans have a restricted list
of physicians.

Preferred provider organizations (PPO)--Similar to an HMO with
pre-negotiated rates with health care providers, but with higher
premiums. …