Benefits of Providing Coverage

What are the added benefits when employers begin to provide health insurance to their workers? Employers themselves may experience reduced costs in areas such as workers’ compensation, ease in recruiting and retaining workers or increased productivity due to reduced absenteeism. Workers and families of workers who were previously uninsured may experience greater access to medical care services and better health outcomes. In addition, society in general—and taxpayers especially—may benefit from a healthier citizenry and a reduction in the tax burden associated with uncompensated care provided to the uninsured.

Employer Benefits

Research from the UC Irvine identifies several possible arguments upon which the business case for offering health insurance might be made. The report discusses the economic logic pertaining to each argument and summarizes the relevant empirical evidence. The analysis is based on a review of academic literature regarding the impact of employer-sponsored health insurance on total compensation, employee turnover, workers’ compensation costs, employee absenteeism, health and morale. Read “The Business Case for Employer-Provided Health Benefits.

Through a special program called Financially Affordable Care for Uninsured San Diegans (FOCUS), small businesses in San Diego purchased subsidized insurance for their workers. A subsequent analysis of workers’ compensation claims and the extent to which absenteeism, morale and hiring good workers were problems at these firms shows the positive effects of offering health insurance. When compared to businesses that did not offer health insurance, it appears that offering FOCUS resulted in improvements in the ability to hire good workers, reductions in the number of workers’ compensation claims and reductions in the extent to which absenteeism and productivity were problems for FOCUS businesses.

Worker Benefits

The Institute of Medicine (IOM) performed a three-year study on the “Consequences of Uninsurance” to assess and consolidate evidence about the health, economic and social effects on people without health insurance and their families, healthcare systems and institutions and communities as a whole. Six reports have been released, including “Care Without Coverage: Too Little, Too Late,” which finds that working-age Americans without health insurance are more likely to receive too little medical care and receive it too late, be sicker and die sooner and receive poorer care when they are in the hospital, even for acute situations like a motor vehicle crash.

A June 2003 supplement of Medical Care Research and Review presents a compelling case that health insurance does lead to improved health and better access to care. The supplement includes four commentaries on the topic and features a review of 25 years of research literature. The Kaiser Commission on Medicaid and the Uninsured supported the research and supplement, “Sicker and Poorer—The Consequences of Being Uninsured: A Review of the Research on the Relationship between Health Insurance, Medical Care Use, Health, Work, and Income.”

Benefits to Society

Another report in the IOM series mentioned above is Hidden Costs, Value Lost: Uninsurance in America, which concludes that the estimated benefits across society in health years of life gained by providing the uninsured with the kind and amount of health services that the insured use are likely greater than the additional social costs of doing so. The potential economic value to be gained in better health outcomes from uninterrupted coverage for all Americans is estimated to be between $65 and $130 billion each year.

A February 2003 study estimates that nationally those who are uninsured for a full year pay out of pocket for about 35 percent of their medical costs—and about 60 percent of their care is provided by hospitals and other providers on an uncompensated basis. Because government provides up to 80 to 85 percent of the funds used to provide uncompensated care, expanding employer-sponsored coverage could significantly reduce the cost to the government of caring for the uninsured. However, taxpayer savings would be partially offset by tax subsidies for employer-sponsored insurance, because health insurance premiums are tax-deductible as a business expense. The study authors also note that expanding coverage would likely result in an increase in real resource cost (regardless of who pays), because the uninsured receive about half as much medical care as the privately insured. Health Affairs published the study online: “How Much Medical Care Do the Uninsured Use, and Who Pays For It?.”