Compensation and Working Conditions Summer 2000 23

Special Services in Employer-sponsored Health Plans

M. SUSAN MARQUIS

STEPHEN H. LONG

Special Services in

Employer-sponsored

Health Plans, 1993 and

1997

Coverage for mental health services, prescription drugs,

dental care, and vision care in employer-sponsored health

insurance plans expanded between 1993 and 1997; by

1997, these services comprised nearly one-quarter of

health care spending. This article examines the prevalence of coverage for these services, recent trends in

coverage rates, and the generosity of benefits based on

data from the National Employer Health Insurance Survey and the 1997 Robert Wood Johnson Foundation

Employer Health Insurance Survey.

Employer-sponsored health insurance plans often cover anumber of special services, in

addition to the physician and hospital

services that form their common core

of benefits. These special services—

including mental health, prescription

drugs, dental, and vision—comprise

a significant portion of spending for

all personal health services, and many

of them are growing at rates well above

average. National personal health care

expenditures for these four special services combined were almost $219 billion, or 22.6 percent of all personal

health service spending, in 1997. (See

table 1.) Total spending for these services grew by 9.2 percent from 1996

to 1997, or at nearly twice the rate of

increase for all personal health services. Coverage for some of these special services also is the subject of recent policy attention.1

The literature provides some information about the prevalence of coverage for special services. G. A. Jensen

and others reported that coverage of

mental health services is high—93

percent of insured workers were covered for these benefits in 1995.2 They

found that coverage rates are strongly

related to firm size, with only 81 percent of workers covered for mental

health in firms with fewer than 50

employees, compared with 97 percent

in firms with 200 or more employees.

Moreover, employer-sponsored coverage for mental health services grew by

6 percentage points between 1991 and

1995.

Information on the remaining three

services comes from another source

that is limited to medium and large

employers. For employees participating in the employer-sponsored medical plans of these establishments, the

prevalence of prescription drug, dental, and vision coverage was 96 percent, 77 percent, and 33 percent, respectively, in 1997.3 Prescription drug

M. Susan Marquis and Stephen H. Long are senior economists, RAND, 1200 South Hayes Street,

Arlington, VA 22202-5050. The authors’ views

are their own and do not necessarily reflect those

of the RWJF, NCHS, RAND, the Bureau of Labor Statistics, or the Department of Labor.

Telephone: Marquis (703) 413-1100 ext. 5208

Long (703) 413-1100 ext. 5370

E-mail: susanm@rand.org and long@rand.org
24 Compensation and Working Conditions Summer 2000

coverage in these establishments was

essentially as likely in 1989 as it was

in 1997.4

The purpose of this article is to examine the prevalence of coverage for

special services among insured workers, recent trends in coverage rates,

and the generosity of the benefits provided. Our estimates are based on two

large national employer health insurance surveys.

Data and concepts

Data from the National Employer

Health Insurance Survey (NEHIS) and

the 1997 Robert Wood Johnson Foundation (RWJF) Employer Health Insurance Survey were used to measure

special services coverage. The NEHIS

completed interviews with 34,604 private employers nationwide, and the

RWJF survey interviewed 21,545 private business establishments in the

continental United States. The NEHIS

was administered during 1994; employers were asked to report characteristics of coverage as of the end of

1993. The RWJF survey was administered during 1997, with employers

being asked to report coverage as of

the date of the interview.

Both samples were drawn from the

Dun’s Market Identifiers national census of employment establishments.

The NEHIS sample was stratified by

State and, within State, by firm and

establishment size.5 The RWJF sample was concentrated in the 60 communities tracked by the RWJF Community Tracking Study and in 12

States that enacted legislation with significant regulations on premiums that

can be charged to small businesses.

These cases were supplemented by a

sample from the remainder of the continental United States to better represent the Nation’s business establishments.6 Within geographic units, the

sample was further stratified by the

number of workers at each establishment. Simple random samples were

then selected from within each stratum.

Data from interviewed employers

in both surveys were weighted to account for different sampling probabilities and for nonresponse. Health plan

enrollee weights were used throughout this study because coverage comparisons are for insured workers only.

The weighted samples represent health

plan enrollees in all private establishments that have at least one employee.7

The NEHIS sample used in the study

was restricted to health plan enrollees

in the continental United States because this was the population covered

in the RWJF survey.

The surveys used similar questions

and definitions. Both collected information from employers using computer-assisted telephone interviews,

which were conducted with the person or persons in each establishment

most knowledgeable about health benefits and firm and worker characteristics. The databases were subjected to

similar algorithms to edit data for consistency and to impute missing data.

The response rate was 71 percent for

the NEHIS and 60 percent for the

RWJF survey.

A number of specialized concepts

and definitions were used in this study.

To measure whether insured workers

were offered coverage for a special service, we considered the benefits in the

particular general medical plan in

which they were enrolled as well as

those in any separate single-service

plans available to them through their

employer. Because the surveys collected information on the enrollments

in the special-service plans as well as

the general medical plans, we also

were able to determine how many enrollees held the expanded package of

benefits including these special-service

plans and how many held just the general medical plan benefits.

Establishments were defined as

having low- or high-wage workers

based on the average earnings of the

workers.8 Establishments with lowearnings workers were those with average earnings in the lowest quintile

of the distribution of all establishments, and establishments with highearnings workers were those with average earnings in the highest quintile.

In the 1997 RWJF survey, employers were asked to report the amount of

employee cost-sharing (above any deductible) for physician’s services in the

general medical plan. If mental health

services or prescription drugs were included as benefits of the general medical plan, the employer was asked

whether cost-sharing for these services

differed from that for physician services, and the amount of cost-sharing

if it differed. If mental health services

or prescription drugs were covered under separate, single-service plans,

employers reported the cost-sharing

amounts in these plans. The cost-sharing amount for physician services in

the general medical plan was compared with that for the special-services

in the general medical plan or singleservice plan, as applicable, to characTABLE 1. National personal health care expenditures by selected special services, 1997

Total ........................................................ $969.0 100.0 4.9

Special services ................................................ 218.9 22.6 9.2

Mental health ............................................... 75.5 7.8 7.2

Prescription drug .......................................... 78.9 8.1 14.1

Dental .......................................................... 50.6 5.2 6.5

Vision products and other

 medical durables ....................................... 13.9 1.4 3.6

Service Expenditures

(In billions)

Percent of

total

expenditures

Growth rate,

1996-97

(Percent)

1

2

 1 The 1997 estimates were calculated using 1996 estimates and 1986-96 average annual growth rates reported by McKusick and

others. To avoid double-counting, data exclude retail prescription drugs.

 2 Vision was not reported separately in

the original source.

 SOURCE: Levit and others, “National

Health Expenditures in 1997: More Slow

Growth,” Health Affairs, November/December 1998, pp. 99-110; McKusick and others,

“Spending for Mental Health and Substance

Abuse Treatment in 1996,” Health Affairs,

September/October 1998, pp. 147-57.
 Compensation and Working Conditions Summer 2000 25

Special Services in Employer-sponsored Health Plans

terize the relative generosity of benefits for these two services.

Coverage

In 1997, coverage for mental health

services and prescription drugs was

nearly universal—96 percent and 95

percent, respectively—among workers

who were enrolled in employer-sponsored health insurance plans. (See

table 2.) In contrast, dental coverage

was held by about two-thirds of insured

workers and vision benefits by about

one-half of insured workers. The

lower coverage rates for these latter

services were explained mostly by

whether the employer offered the coverage; when it was offered, between

83 percent (vision) and 90 percent

(dental) of workers were enrolled.

Coverage for all four special services rose between 1993 and 1997,

with increases that ranged from 4 percentage points for prescription drugs

to 12 percentage points for vision.

These increases can be attributed both

to an increase in the likelihood of employers offering the benefits and an

increase in the likelihood of employees

enrolling when the benefit is offered.

There were some differences in coverage rates for special services by firm

size and worker earnings. In both

years, 1993 and 1997, insured workers in small firms (those with fewer

than 25 employees) were less likely to

be covered for each of the special benefits than were those in larger firms.

(See table 2.) The extreme case is dental coverage, which in 1997 was only

about half as likely among insured

workers in small firms (39 percent) as

it was among those in firms with 500

or more employees (75 percent). Increases in coverage between 1993 and

1997 occurred among employees in

firms of all sizes; however, the largest

increases in coverage for most services

took place among small firms. Workers in establishments with higher earnings levels were more likely to be covered for each of the special benefits

studied in both years. Overall, this

effect was especially pronounced in

firms with fewer than 100 employees.

Benefits

Table 3 shows how participants’ costsharing for mental health and prescription drug benefits compared to their

cost-sharing for physician services in

1997. Cost-sharing for mental health

tends to be the same for about threequarters of enrollees, while it is higher

(a less generous benefit) about onequarter of the time. Larger employers

are more likely to use less generous

cost-sharing as a cost containment

mechanism than are smaller employers. In contrast, cost-sharing for prescription drugs is lower for about onefifth of enrollees, while it is the same

about four-fifths of the time. For

prescription drugs, large employers appear to be a bit more likely to have more

generous benefits, although the difference is not statistically significant.

Discussion

Special services are a significant portion of national health spending and

TABLE 2. Percent of insured workers participating in coverage for selected special services by firm size and average worker earnings

in the establishment, 1993 and 1997

Offered ............................................................................ 92 98 94 96 71 72 45 56

Offered and enrolled .................................................. 97 99 97 99 83 90 75 83

Covered ........................................................................... 89 96 91 95 59 65 34 46

Firm size

Fewer than 25 ....................................................... 77 93 79 92 33 39 21 35

25-99 .................................................................... 86 95 90 96 47 52 25 42

100-499 ................................................................ 91 98 94 97 59 65 33 42

500 or more .......................................................... 93 97 94 95 70 75 41 52

Firm size3 and worker earnings in establishment4

Fewer than 100

Low worker earnings ....................................... 74 91 80 87 33 40 20 37

High worker earnings ...................................... 85 96 85 95 46 52 27 40

100 or more

Low worker earnings ....................................... 90 97 92 94 61 77 33 42

High worker earnings ...................................... 94 98 93 96 71 77 47 49

Services in—

Percent of insured workers Mental health Prescription drugs Dental Vision

1993 1997 1997 1997 1997 1993 1993 1993

1

2

1

 Percent of insured workers who were offered the benefit and

participated in it. 2 Percent of total workers who are enrolled in a benefit. For example, in 1997, if 72 percent of insured employees are offered dental

benefits and 90 percent of them enroll in the benefit, 65 percent of

total workers are covered by the benefit. 3

 Number of employees.

4

 Low worker earnings signifies establishments in the lowest quintile

of the distribution of average worker earnings; high worker earnings

signifies establishments in the highest quintile.

SOURCE: 1993 National Employer Health Insurance Survey and

1997 Robert Wood Johnson Foundation Employer Health Insurance

Survey.

3
26 Compensation and Working Conditions Summer 2000

are covered under employer plans for

many enrollees. For the 1993-97 period, coverage of the four special services studied was expanding. However, this was a period of relatively

stable prices for employer-sponsored

health coverage overall. If health insurance premiums start to rise more

rapidly, employers might respond either by cutting back this new coverage or by reducing the breadth of current benefits. Policy changes, such as

mandated benefits and mental health

parity, also could affect coverage of

these services. These trends deserve

monitoring over coming years.

TABLE 3. Percent of insured workers whose participant cost-sharing for selected

special services benefits is lower than, the same as, or higher than their cost-sharing

for physician services by firm size, 1997

 Total ............................ 3 73 24 18 79 3

Fewer than 25 ...................... 2 81 17 15 83 2

25-99 ................................... 3 78 19 15 82 3

100-499 ............................... 3 72 25 17 79 4

500 or more ......................... 3 71 26 19 78 3

Patient cost-sharing for

Firm size1 Mental health compared to

physician services

Prescription drugs compared

to physician services

Lower Same Higher Lower Same Higher

1

 Number of employees.

SOURCE: 1997 Robert Wood Johnson

Foundation Employer Health Insurance Survey.

ACKNOWLEDGMENT: This research was

supported by grants (028561 and 031565) from

the Robert Wood Johnson Foundation (RWJF) and

by contract (9830372) from the National Center

for Health Statistics (NCHS). The authors thank

Linda Andrews, Roald Euller, and Ellen Harrison

for their efforts in preparing the survey data files

on which this study is based. 1

 For example, the Mental Health Parity Act

of 1996 prohibits annual and lifetime reimbursement ceilings for mental health coverage that are

more restrictive than other ceilings. Prescription

drug coverage for medicare is currently under debate and if spending trends continue there will be

pressure on employers to modify this benefit as

well. See K. Swartz, “Be Creative in Consumer

Cost-Sharing for Pharmaceutical Benefits,” Inquiry, Winter 1998-99, pp. 365-68.

2

 G. A. Jensen and others, “Mental Health

Insurance in the 1990s: Are Employers Offering

Less to More?” Health Affairs, May/June 1998,

pp. 201-08. 3 Employee Benefits in Medium and Large

Private Establishments, 1997, Bulletin 2517 (Bureau of Labor Statistics, September 1999). 4

 Ibid., and C. Baker and N. Kramer, “Employer-sponsored prescription drug benefits,”

Monthly Labor Review, February 1991, pp. 31-

35. 5

 A. J. Moss, Plan and Operation of the National Employer Health Insurance Survey

(Hyattsville, MD, National Center for Health Statistics, 1999). 6

 1997 Employer Health Insurance Survey:

Final Methodology Report (Research Triangle

Park, NC, Research Triangle Institute, 1998); and

P. Kemper and others, “The Design of the Community Tracking Study: A Longitudinal Study of

Health System Change and Its Effects on People,”

Inquiry, Summer 1996, pp. 195-208. 7

 Self-employed individuals with no employees are excluded. 8

 These measures were based on responses

in the two surveys about the shares of workers

with earnings in a set of categories. In NEHIS,

there were 3 categories: Less than $10,000 per

year, $10,000-$30,000 per year, and $30,000 per

year or more. In RWJF, there were 5 categories:

Less than $10,000 per year, $10,000-$14,000

per year, $14,000-$20,000 per year, $20,000-

$30,000 per year, and $30,000 per year or more.