These are important issues given that virtually all firms with two hundred or

These are important issues given that virtually all

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These are important issues, given that virtually all firms with two hundred or more employees offer health insurance, and employers pay 85 percent of the premium for individual policies and 73 percent for family coverage. Employment-based insurance affects 153 million workers and dependents, as well as five million early retirees in the United States. We use interview data collected at multiple sites over six years to discuss two interrelated historical roles that employers have played in local health care systems, one relatively private and one typically very public. The private role involves the decisions of each individual firm in managing its health benefits. The public role focuses on the collaborative efforts of employers to accomplish their objectives in local health care systems. The literature provides three distinct perspectives on employers and their health benefits decisions. These perspectives are not mutually exclusive, but they do emphasize different factors as being of primary importance in employer decision making. Together, they provide a framework that is useful for interpreting our empirical findings relative to the private and public roles of employers in local health care markets. The first perspective emphasizes the role health benefits play in attracting and retaining workers, in the context 9
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of the employer's overall employee compensation strategy. This perspective is largely based on standard theories of labor and product markets. One prediction of these theories is that increases in health care costs will be borne largely by employees, in the form of lower wages. The net result is that total compensation remains largely unchanged, but workers receive more of that compensation in health benefits and less in wages. If the adjustment process occurs relatively quickly, increases in health care costs have only a minor, short-term negative impact on firm profits. Other recent studies did not find supportive evidence. Another way of framing this perspective is that employer efforts to reduce coverage or implement other changes in the pursuit of cost control themselves have a cost. If employees perceive that these efforts diminish the value of health benefits, they may leave the employer unless compensation is increased in other areas. This suggests that employer efforts to contain health care costs will not cause profits to increase. Therefore, from this perspective, the key question for employers is how to package health benefits with other compensation in order to be successful in a competitive labor market. The first perspective raises the question of why employers would want to devote much managerial effort to containing premium increases. Yet, many employers clearly have devoted resources to this end over the years, suggesting that they hold a different view.
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