To Offer or Not to Offer

The Role of Price Employers' Health Insurance Decisions

Published in: Health Services Research, v. 36, no. 5, Oct. 2001, p. 935-958

Posted on RAND.org on January 01, 2001

by M. Susan Marquis, Stephen H. Long

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OBJECTIVE: To estimate the effect of changes in price on employers' decisions to offer health insurance. DATA SOURCES/STUDY SETTING: A 1993 survey of 22,347 private employers in ten states was used. STUDY DESIGN: Probit regression was used to estimate the probability of offering insurance as a function of the price and employer characteristics. For employers who did not offer insurance, a price cannot be directly observed. We estimated price for nonofferors using reported quotes received by recent shoppers and a selection model to correct for differences between recent shoppers and nonshoppers. PRINCIPAL FINDINGS: Changes in price affect decisions to offer insurance; however, even a 40 percent reduction in premiums would lead to only a 2 to 3 percentage point increase in the share of employers offering insurance. Employers of low-wage workers are substantially less likely to offer health insurance than other employers. CONCLUSIONS: Policies to reduce the number of uninsured that focus on increasing the supply of employment-based insurance are unlikely to have the intended effect unless coupled with policies to help low-wage workers afford insurance.

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