Research Reveals Folly of Managing Healthcare through Employers
Employment Policies Institute collection of research supports consumer-driven plans as more effective; no unintended consequences
Publication Date: February 2006
Topics: Health Care
Washington, DC – Three studies released by the Employment Policies Institute reveal mandates requiring businesses to provide healthcare coverage are ineffective and ultimately result in job loss for the nation’s low-skilled employees.
Research from economists at the University of Santa Cruz found that healthcare mandates fail to effectively increase coverage for the vast majority of the uninsured because those who experience loss of coverage over time are unemployed, employed part-time, employed at firms with fewer than 10 employees, or newly employed and have yet to accrue the tenure required for eligibility.
Research from economists Katherine Baicker, currently a member of the President’s Council of Economic Advisers, and Helen Levy of the University of Michigan found that if a typical insurance mandate were broadened to the national level, 45 percent of employees without insurance would see no increase in coverage. Such a mandate would trigger job loss for over 315,000 Americans as employers would be forced to rein in skyrocketing labor costs. This catastrophic job loss would be concentrated among the nation’s low-skilled employees.
Additional research from Dr. Baicker, conducted with Amitabh Chandra of Harvard University, examined the devastating impact of rising insurance premiums finding that a 10 percent increase in insurance premiums results in a wage reduction of approximately 3.4 percent—an approximate $2,000 loss in annual income—for those receiving coverage through their employer. They estimate a 20 percent increase in insurance premiums could result in a reduction of 4 million jobs nationwide.
In light of the considerable research revealing the faults of healthcare mandates, experts recommend a more consumer-driven solution to the high cost of healthcare today. Economists R. Glenn Hubbard, John F. Cogan, and Daniel Kessler have made highly influential recommendations for reducing healthcare costs and increasing accessibility for the uninsured that would not jeopardize jobs for the low-skilled. In an EPI-sponsored paper that recently appeared in the peer-reviewed journal Health Affairs they recommend policy changes centered on individual tax deductions for health expenses; increased eligibility for Health Savings Accounts; tax credits for low income households; creating a nationwide market for health insurance; and providing a health insurance subsidy to those with predictable and persistently high healthcare costs.
“Demanding employers provide healthcare will not effectively increase healthcare coverage in today’s economy,” said Richard Berman, executive director of the Employment Policies Institute. “Instead of mandates on businesses, lawmakers need to look toward consumer-driven solutions that won’t result in job loss or reduced income for the nation’s low-skilled employees.”