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The Future of the Public’s Health in the 21st Century
EMPLOYERS’ ROLE IN HEALTH INSURANCE COVERAGE
Employers make a major contribution to population health and health security because of the important role they play in providing health insurance. Employers are primarily motivated to offer health insurance benefits to recruit and retain employees and to be competitive in the marketplace. Employees value health insurance and benefits and the opportunity to extend such coverage to their dependents.
For a number of historical reasons, employment is the foundation of the private health insurance system in the United States. Ninety percent of persons under the age of 65 who are privately insured obtain their health insurance through employers. Voluntary employer-sponsored health insurance is offered to employees and their dependents as part of a typical compensation package. In 2002, 62 percent of all firms (including both public and private employers) offered health benefits to their employees, a decline from a high of 67 percent in 2000 (Kaiser Family Foundation, 2002).
The percentage of firms offering health benefits varies by the size of the firm. For example, in 2002, 99 percent of firms with more than 200 workers offered health benefits to their employees, whereas less than 61 percent of small firms (those with 3 to 199 employees) offered such benefits (see Figure 6–1) (Kaiser Family Foundation, 2002).
Small firms are less likely to offer health insurance for a number of reasons, including the increased cost of a comparable insurance package because of higher administrative costs, lower employee wages, and more part-time workers (Custer and Ketsche, 2000).
Employees place a high value on health insurance. According to the Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc.’s Value of Benefits Survey, 60 percent of employees rank health insurance as the most important benefit. Employees also report that benefits (e.g., health insurance and retirement plans) continue to be a very important factor in job selection (EBRI, 2002; Lave et al., 1999; Peele et al., 2000).
Most employers (both private and public) believe that they play an important role in providing health insurance coverage and that they can provide better coverage than employees could buy on their own. However, changing economic pressures are causing employers, particularly private firms, to reconsider the nature of their health insurance offerings. Pressures resulting from the slowing of the U.S. economy, rising health care costs associated in part with increasingly looser forms of managed care, rising prescription drug prices, and employee demands are making it more difficult for small employers to offer insurance coverage and for large employers to maintain premiums at affordable levels (Custer and Ketsche, 2000; Lambrew, 2001; Kaiser Family Foundation, 2002). Data indicate that pre-