Cover: The Economic Burden of Providing Health Insurance

The Economic Burden of Providing Health Insurance

How Much Worse Off Are Small Firms?

Published Mar 17, 2008

by Christine Eibner

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More than 60 percent of nonelderly Americans receive health-insurance (HI) coverage through employers, either as policyholders or as dependents. However, rising health-care costs are leading many to question the long-term viability of the employer-based insurance system. Concerns about the economic burden of providing HI are particularly acute for small businesses, which are both less likely than larger firms to offer HI and more sensitive to price when deciding to offer insurance. Small firms may have difficulty containing costs due to their limited bargaining power and their inability to hire experts skilled in negotiating with insurance companies. Further, while few recent studies have systematically explored differences in the quality of HI plans that small and large firms offer, small firms may offer health plans of lower quality. To better understand these issues, researchers from the Kauffman-RAND Institute for Entrepreneurship Public Policy (KRI) explored trends in the economic burden associated with HI provision, as well as the distribution of this burden, for small and large businesses. They also considered the quality of plans that small and large firms offer.

The research described in this report was conducted within the Kauffman-RAND Institute for Entrepreneurship Public Policy in the RAND Institute for Civil Justice (ICJ). ICJ research is supported by pooled grants from corporations, trade and professional associations, and individuals; by government grants and contracts; and by private foundations.

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