Self-Reported Health and Risk Behaviors: Do They Influence Attitudes toward Pricing Health Insurance?

Some form of health insurance is offered to employees by approximately 60% of private organizations. While 59% of private organizations with less than 100 employees offer health insurance, this benefit is offered by 93% of those organizations with 100 or more employees. Approximately 24% of all employers pay the full cost of health insurance and 13% pay for the cost of family coverage (Bureau of Labor Statistics, 2007). The average total monthly cost of health insurance for the employee is $428 and an average of 81% is paid by the employer. The average total monthly cost for family coverage is $1078 with the employer paying approximately 71% of cost (Bureau of Labor Statistics, 2007). In a survey of 400 firms, it was reported (U. S. Chamber of Commerce, 2008) that the average annual cost of medical insurance for an employee is $5924. This amount represented approximately 14.5% of total payroll cost in 2005 and is an increase from the 11.9% reported in 2004. Based on per hour worked, these data are consistent with governmental data (Bureau of Labor Statistics, 2010) that show an increase of 94% from 1999 to 2009, and an increase in the annual cost of health insurance of 36.8% from 2004 to 2009. Employers began to observe increased cost associated with providing health insurance beginning in the 1970s and 1980s (Park, 2000). Such increases continue today and it is expected that these costs will continue to increase into the foreseeable future (Covel and Spors, 2008). As employers were negatively impacted by increasing health benefit costs, they identified and explored a number of cost control options. In general, these options can be considered as direct or indirect cost controls. While each option is focused on cost reduction, the process and impact on the employee are different. Consequently, the two general options are briefly discussed below. Direct Cost Control Risk management through beneficial selection was a major tool for controlling health care costs prior to the passage and enactment of the Americans with Disabilities Act in 1990. Before ADA, what might be referred to as risk avoidance or reduction was based on pre-employment medical exams, which were, for some organizations, extended to family members. By selecting low risk employees with low risk families, organizations could significantly reduce their exposure to increased health care costs based on employees' and dependents' health care utilization. After passage of the ADA, which, in general, prohibits preemployment physicals, the use of this form of risk reduction has been severely limited. That is, ADA does allow pre-employment physicals when it is determined that the applicant's health is a bona fide occupational qualification for job performance. It cannot be denied, however, that employers may secure health data from other sources (Kapur, 2004). The prohibition of beneficial risk selection as a risk reduction tool caused employers to focus on direct cost reduction efforts. In its most extreme form, a direct cost reduction effort is represented by the elimination of the health care benefit. Because of the unfavorable variability of premiums, the elimination of health care benefits appeals primarily to small employers (Monheit and Schone, 2003). Larger employers seldom experience wide variations in premiums and, consequently, have fewer reasons to discontinue health care benefits. Because of the assumed relation between health care benefits and the employer's ability to attract applicants (Monheit & Vistnes, 1999), employers appear to view elimination of health care benefits as a last resort. Many employers identified cost-sharing as a reasoned approach to counter increased health benefit costs. Cost-sharing can take a number of forms, but some are best viewed as cost-limiting. Imposing limits on covered benefits or the elimination of certain types of health benefits can be considered as cost-limiting efforts. …