Abstract
Robert Kaestner addresses the tensions between employers and employees in providing consumer choice and health insurance. The author points out that the dominance of employer-sponsored insurance in the private payer market stems from the favorable tax considerations of such insurance that allows employees to obtain insurance without being taxed on its value, and from the market and administrative efficiencies associated with insuring large groups. Given its numerical importance, changes in employer-sponsored insurance related to benefits provided, choice of providers, and employee contributions largely determine the amount of choice non-elderly consumers have with respect to health insurance. More importantly, it is widely believed that the design of, and changes to, employer-sponsored health insurance plans are under the control of the employer with little input from employees. However, Kaestner emphasizes that it is theemployee who pays for health insurance, despite the perception that this is an employer cost. These beliefs lead to the conclusion that consumers don’t have much choice about health insurance and are dependent on the employer. The author’s goal in this essay is to show that this conventional wisdom is incorrect.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Altman, Daniel, David Cutler, and Richard Zeckhauser. (2000). “Enrollee Mix, Treatment Intensity, and Cost in Competing Indemnity and HMO Plans.” NBER Working Paper No. 7832, National Bureau of Economic Research.
Buchmueller, Thomas. (2000). “The Business Case for Employer-provided Health Benefits.” Unpublished manuscript, California Healthcare Foundation.
Council for Affordable Insurance. “Mandated Health Insurance Benefits.”CAHI Policy Brief 1:6 (1997): 1–5.
Council for Affordable Insurance. (2004). “Health Insurance Mandates in the States 2004.” URL: http://www.cahi.org/cahi_contents/resources/pdf/Mandatepub2004Electronic.pdf, last accessed October 4, 2004.
Cutler, David. (2004).Your Money or Your Life: Strong Medicine for America’s Health Care System. New York: Oxford University Press.
Cutler, David, Mark McClellan, and Joseph Newhouse. “How Does Managed Care Do It?”Rand Journal of Economics 31:3 (2000): 526548.
Employee Benefits Research Institute. (2003).Health Confidence Survey. URL:www.ebri.org/hcs/, accessed September 20, 2004.
Glied, Sherry. (2000). “Managed Care,” inHandbook of Health Economics, Volume 1. Chapter 13. Elsevier Science B.V.
Goodman, John C., and Merrill Mathews. (1997). “The Cost of Health Insurance Mandates.” National Center for Policy Analysis Brief Analysis #237. Dallas, TX: National Center for Policy Analysis.
Gruber, Jonathan. (1998). “Health Insurance and the Labor Market.” NBER Working Paper No. 6762. Cambridge, MA: National Bureau of Economic Research.
Kaestner, Robert, and Kosali Ilyaperuma Simon. “The Labor Market Consequences of State Health Insurance Regulation.”Industrial and Labor Relations Review 56:1 (2002): 136–159.
Kaiser Family Foundation. (2004).Employer Health Benefits: 2004 Annual Survey. URL:www.kff.org/insurance/7148/index.cfm, accessed on September 14, 2004.
Levit, Katherine, Cynthia Smith, Cathy Cowan, Art Sensenig, Aaron Catlin, and the Health Accounts Team. “Health Spending Rebound Continues in 2002.”Health Affairs 23:1 (2004): 147–159.
Manning, Willard G., Joseph P. Newhouse, Naihua Duan, Emmett B. Keeler, and Arleen Leibowitz. “Health Insurance and the Demand for Medical Care: Evidence from a Randomized Experiment.”American Economic Review 77:3 (1987): 251–277.
Mays, Glen P., Robert E. Hurley, and Joy M. Grossman. “An Empty Toolbox? Changes in Health Plans’ Approaches for Managing Costs.”Health Services Research 38:1 (2003): 75–393.
McGuire, Thomas. (2000). “Physician Agency.”Handbook of Health Economics (chap. 9, pp. 461–528), ed. A. J. Culyer and J. P. Newhouse. Amsterdam: Elsevier Science.
Miller, Robert, and Harold Luft “Does Managed Care Lead to Better or Worse Quality of Care?”Health Affairs 16:5 (1997): 7–25.
Newhouse, Joseph. “Medical Care Costs: How Much Welfare Loss?”Journal of Economic Perspectives 6:3 (1992): 3–22.
Newman, Russ. “A Rising Call for Quality Healthcare.”APA Monitor 29:8 (1998): unnumbered.
Pauly, Mark V. (1997).Health Benefits at Work: An Economic and Political Analysis of Employment-Based Health Insurance. Ann Arbor: University of Michigan Press.
Reinhardt, Uwe, Peter Hussey, and Gerald Anderson. “Cross-national Comparisons of Health Systems using OECD Data, 1999.”Health Affairs 21:3 (2002): 169–181.
Shearer, Gail.Consumer Choice of Health Insurance Plans and Providers. Testimony before Presidential Commission on Consumer Protection and Quality in the Healthcare Industry (June 25, 1997).
Summers, Lawrence H. “Some Simple Economics of Mandated Benefits.”American Economic Review 79 (1989): 177–183
U.S. Census Bureau. (2004).Historical Health Insurance Tables. URL:www.census.gov/hhes/hlthins/histoic/hihisttl.html, accessed September 14, 2004.
Additional information
Robert Kaestner, Ph.D. received his Ph.D. in economics from the City University of New York, and he is currently a professor in the Institute of Government and Public Affairs and the Department of Economics at the University of Illinois at Chicago. Dr. Kaestner is also a research associate of the National Bureau of Economic Research. Dr. Kaestner’s areas of research interest are health and labor economics.
Rights and permissions
About this article
Cite this article
Kaestner, R. Consumer choice and employer-sponsored health insurance. Ageing Int. 31, 168–179 (2006). https://doi.org/10.1007/s12126-006-1011-9
Issue Date:
DOI: https://doi.org/10.1007/s12126-006-1011-9