Public sector retirement systems: what does the future hold?

Public pension plans will continue to search for cost-sharing retiree health care solutions and may shift to a defined contribution emphasis. Fiduciary responsibility will be highlighted in view of controversial plan changes, government budgetary constraints, scrutinized investment return assumptions, potential labor shortages and increased shareholder activism.

Take some days off, why don't you? Endogenous sick leave and pay

This is a model of endogenous sick leave in the presence of endemic infectious diseases. The prevalence rate elasticity with respect to sick leave is unity, when workers are paid their marginal product, and firms profit maximise. Full information contracts yield a compensating higher wage to the sick than to the healthy workers. Sick leave pay is greater than the healthy working wage. The contracted sick leave period falls with: the external disease transmission, the productivity of the ill, the discomfort when ill on sick leave and reductions in the work discomfort of the ill. Full insurance breaks down under asymmetric information, where implicit contract firms may offer more sick leave than profit maximising firms with the same payment schedule.

The economic consequences of irritable bowel syndrome: a US employer perspective

BACKGROUND

The objective of this study was to measure the direct costs of treating irritable bowel syndrome (IBS) and the indirect costs in the workplace. This was accomplished through retrospective analysis of administrative claims data from a national Fortune 100 manufacturer, which includes all medical, pharmaceutical, and disability claims for the company's employees, spouses/dependents, and retirees.

METHODS

Patients with IBS were identified as individuals, aged 18 to 64 years, who received a primary code for IBS or a secondary code for IBS and a primary code for constipation or abdominal pain between January 1, 1996, and December 31, 1998. Of these patients with IBS, 93.7% were matched based on age, sex, employment status, and ZIP code to a control population of beneficiaries. Direct and indirect costs for patients with IBS were compared with those of matched controls.

RESULTS

The average total cost (direct plus indirect) per patient with IBS was 4527 dollars in 1998 compared with 3276 dollars for a control beneficiary (P<.001). The average physician visit costs were 524 dollars and 345 dollars for patients with IBS and controls, respectively (P<.001). The average outpatient care costs to the employer were 1258 dollars and 742 dollars for patients with IBS and controls, respectively (P<.001). Medically related work absenteeism cost the employer 901 dollars on average per employee treated for IBS compared with 528 dollars on average per employee without IBS (P<.001).

CONCLUSION

Irritable bowel syndrome is a significant financial burden on the employer that arises from an increase in direct and indirect costs compared with the control group.

Costs of poor birth outcomes among privately insured

Despite expansions in the public insurance coverage of pregnant women, concerns over poor birth outcomes remain. Poor birth outcomes occur among publicly and privately insured women, however, thereby imposing excess costs on employers and their insurers. Data from a large sample of privately insured for 1996 are used to examine these outcomes and costs. Almost one-fourth (24.3 percent) of the infants in our matched sample of 12,020 deliveries was premature or had other problems at birth. Costs for these infants accounted for 82 percent of the total $56 million spent on sample infants. The incremental cost of infants with poor birth outcomes versus those with normal, full-terms was approximately $14,600. We found that these relative costs had increased over time due perhaps to the increased technology and intensity of services used to save infant lives. We also found that factors other than maternal and infant complications affected cost variations. For example, employers located in the Northeast, hiring older mothers, and in unionized sectors have higher prenatal, delivery, and infant costs.

Lower respiratory tract infections: impact on the workplace

BACKGROUND

While there is some literature on the cost of specific respiratory infections, much of the existing research focuses only on direct medical treatment costs and does not take into consideration workplace burden due to disability and absenteeism.

OBJECTIVE

To evaluate the impact of lower respiratory tract infections (LRTIs) on the workplace, specifically regarding the economic burden from an employer's perspective.

DESIGN

Specific LRTI considered here were acute bronchitis, acute exacerbations of chronic bronchitis and pneumonia. Data from medical, prescription drug and disability claims of a large, national company in the US were used. These data provide information on both the healthcare and work loss impacts of LRTI on this major self-insured employer. The annual per capita expenditures for persons with LRTI were determined for beneficiaries (including employees and dependants) of this employer by analysing all claims in 1997. Results were compared with those of a 10% random sample of beneficiaries in the employer's overall beneficiary population.

RESULTS

In 1997, total per person expenditures and total medical service utilisation were higher among beneficiaries with LRTI than among beneficiaries in the overall beneficiary population sample. Annual per capita employer expenditures for beneficiaries with LRTI totalled 6,116 US dollars, compared with 2,368 US dollars (1997 values) for the average beneficiary in the overall beneficiary population sample. Employer payments for lost work time through disability and absenteeism accounted for 17% of these expenditures amongst beneficiaries with LRTI and for 35% amongst employees with LRTI.

CONCLUSIONS

Annual per capita expenditures for beneficiaries with LRTI were almost three times that of the average beneficiary. We conclude that it is important to consider work loss in analyses of the cost of LRTI.

Employer-sponsored insurance: how much financial protection does it provide?

The authors examine the generosity of private employer health insurance coverage using data from two large national surveys of employers. Generosity is measured as the expected out-of-pocket share of medical expenditures for a standard population, given the provisions of the coverage. On average, those covered by employer-sponsored insurance can expect to pay 25 percent of expenditures out of pocket. There is little variability across plans in this share, though plans offered by smaller employers are somewhat less generous than those offered by larger employers. Individuals who incur high costs pay a smaller share of the bill than do those with lower levels of spending. The generosity of employer-sponsored plans increased slightly in the 1990s.

Comparing changes in health risk factors and medical costs over time

PURPOSE

This study was designed to examine the association between health status/behaviors and changes in these measures over time with health costs.

DESIGN

This study employed a 6-year (1993-1998) retrospective cohort design to examine the relationship between health indicator variables, health insurance costs, and utilization. The outcome variables of interest were measures of health insurance costs and utilization of health care services.

SETTING

Public employer located in the northeastern United States.

SUBJECTS

In all, 1940 employees were included in the study on the basis of their membership in the worksite health plan and their having complete health indicator data collected during each of the two time periods (1993-1995 and 1996-1998).

MEASURES

The health insurance data were obtained directly from the organization's Third Party Administrator. The health indicator variables included blood pressure, cholesterol, body mass index, and smoking status.

RESULTS

At-risk employees had a greater probability of submitting health insurance claims than did no-risk employees in approximately 70% of the 18 Major Diagnostic Codes that were examined. Higher costs were associated with the at-risk classification (mean = $3237 and median = $433) over time, and lower costs (mean = $1626 and median = $49) were associated with maintaining a no-risk status over time.

CONCLUSIONS

These findings support the notions that lower health risk and maintaining a no-risk status over time are associated with lower health insurance costs.

Small firms' demand for health insurance: the decision to offer insurance

This paper explores the decisions by small business establishments (< 100 workers) to offer health insurance. We estimate a theoretically derived model of establishments' demand for insurance using nationally representative data from the 1997 Robert Wood Johnson Foundation Employer Health Insurance Survey and other sources. Findings show that offer decisions reflect worker demand, labor market conditions, and establishments' costs of providing coverage. Premiums have a moderate effect on offer decisions (elasticity = -.54), though very small establishments and those employing low-wage workers are more responsive. This suggests that premium subsidies to employers would be an inefficient means of increasing insurance coverage. Greater availability of public insurance and safety net care has a small negative effect on offer decisions.

Productivity costs before and after absence from work: as important as common?

Traditionally, production losses are estimated using the human capital or friction cost method. These methods base estimations of productivity costs on data on absence from work. For some diseases, like migraine, productivity losses without absence are occasionally calculated by estimating the production losses from reduced productivity at work. However, diseases typically only associated with absence may also be expected to cause reduced productivity before and after absence. In a previous study, Brouwer et al. concluded that productivity losses without absence are also very relevant in common diseases, like influenza, common cold or neck-problems. Studying a new sample of employees of a Dutch trade-firm (n = 51), who completed the questionnaire 'Ill and Recovered' upon return to work after absence due to illness, it was revealed that about 25% of the respondents experienced production losses before absence and about 20% of the respondents experience production losses after absence. This leads to an increase in estimated production losses of about 16% compared with only considering absence data. Current productivity costs estimates based solely on absence data may, therefore, underestimate real productivity costs. Compensation mechanisms in firms may reduce the underestimation.

Economic burden of respiratory infections in an employed population

CONTEXT

While respiratory infections are a leading cause of morbidity, there is little information on the costs of medically treating these conditions, or on their workplace impact.

OBJECTIVE

The purpose of this study was to estimate the economic burden of respiratory infections from the perspective of an employer.

DESIGN, SETTING, AND PARTICIPANTS

A total of 63,890 patients with at least one diagnosis for a respiratory infection in 1997 were identified in a claims database of a national Fortune 100 company. Outcome measures were compared to those of a 10% random sample of beneficiaries in the overall beneficiary population.

MAIN OUTCOME MEASURES

The annual per capita costs for each category of respiratory infections were determined for beneficiaries of this major employer by analyzing all medical, prescription drug, and disability claims in 1997.

RESULTS

In 1997, the total cost to the employer per patient, as well as medical-service utilization, were higher among patients with respiratory infections than among beneficiaries in the overall beneficiary population. Significant variations exist in costs across the 11 selected respiratory infections. For example, annual per capita employer expenditures for patients with respiratory infections totaled $4,397, while expenditures for patients with pneumonia and patients with acute tonsillitis/pharyngitis were $11,544 and $2,180, respectively, as compared with costs for the average beneficiary, which was $2,368.

CONCLUSIONS

Patients with respiratory infections present an important financial burden to employers. We estimate that the cost to employers of patients with respiratory infections in the United States in 1997 was $112 billion, including costs of medical treatment and time lost from work.

Employer investments in employee health implications for the family as health producer

The model presented in this paper further extends the demand-for-health model in which the family is the producer of health investments, to consider the case in which an employer has incentives for investing in the health of a family member. The household and the employer are assumed to interact strategically in the production of health. The general insight provided is that the conditions which determine the nature of the relationship between the employer and the employee, for instance market conditions, production technologies, taxes, and government regulation, will also affect the allocation of health investments and health capital within the family.

Government mandates and employer-sponsored health insurance: who is still not covered?

We characterize employer-sponsored health insurance offering strategies in light of benefit non-discrimination and minimum wage regulation when workers have heterogeneous earnings and partially unobservable demand for (and cost of) insurance. We then empirically examine how earnings and expected medical expenses are associated with low wage workers' ability to obtain insurance before and after enactment of federal benefit non-discrimination rules. We find no evidence that the non-discrimination rules helped low wage workers (especially those with high own or children's expected medical expenses) to obtain insurance.

The impacts of mental health parity and managed care in one large employer group

We examine the impacts of a state mental health parity mandate on a large employer group, which simultaneously introduced a managed behavioral health care carve-out. Overall, we find that mental health/substance abuse (MH/SA) costs dropped 39 percent from the year prior to three years after parity, with managed care offsetting increases in demand induced by parity coverage. Managed care was most effective in reducing very high inpatient use among adolescents and children. The effect of the parity mandate on access was ambiguous: While treatment prevalence rose nearly 50 percent, similar increases were observed for groups not subject to the mandate.

Variation of employee benefit costs by age

Health care, pension, and disability plans account for the bulk of employers' benefit costs, as defined in this article. Because those costs tend to rise as employees get older, the age structure of the workforce affects not only employers' costs but ultimately their competitiveness in global markets. How much costs vary depends in large part on the structure of the benefits package provided. The method a company chooses to finance benefits generally varies with its size. This article focuses primarily on the benefit practices of large, private employers. In the long run, such employers pay the costs associated with the demographics of their workers, whereas small employers can often pool costs with other companies in the community. In addition, small employers often offer fewer benefits, and the costs and financing of those benefits are subject to the insurance markets and state regulations. The discussion of benefit packages is illustrated by case studies based on benefits that are typical for three types of organizations--a large traditional company such as steel, automobile, and manufacturing; a large financial services company such as a bank or health care organization; and a medium-sized retail organization. The case studies demonstrate the extent to which the costs of typical packages vary and reveal that employers differ radically in the incentives they offer employees to retire at a specific time. An employer can shift the variation in cost by age by changing the structure of the benefit program. The major forces that drive age differences in benefit costs are the time value of money (the period of time available to earn investment income and the operation of compound interest) and rates of health care use, disability, and death. Those forces apply universally, in the United States and elsewhere, and they have not changed in recent years. However, the marketplace and the prevalence of various types of benefit programs have changed, and those changes have generally resulted in less cost variation by age and more frequent employer selection of benefit packages that exhibit less variation by age.

On using sample selection methods in estimating the price elasticity of firms' demand for insurance

We evaluate a technique based on sample selection models that has been used by health economists to estimate the price elasticity of firms' demand for insurance. We demonstrate that, this technique produces inflated estimates of the price elasticity. We show that alternative methods lead to valid estimates.

Burden of health care costs: businesses, households, and governments, 1987-2000

In this article, we estimate expenditures by businesses, households, and governments in providing financing for health care for 1987-2000 and track measures of burden that these costs impose. Although burden measures for businesses and the Federal Government have stabilized or improved since 1993, measures of burden for State and local governments are deteriorating slightly--a situation that is likely to worsen in the near future. As health care spending accelerates and an economy wide recession seems imminent, businesses, households, and governments that finance health care will face renewed health cost pressures on their revenue and income.

Economic burden of pneumonia in an employed population

OBJECTIVE

To estimate the overall economic burden of pneumonia from an employer perspective.

METHODS

The annual, per capita cost of pneumonia was determined for beneficiaries of a major employer by analyzing medical, pharmaceutical, and disability claims data. The incremental costs of 4036 patients with a diagnosis of pneumonia identified in a health claims database of a national Fortune 100 company were compared with a 10% random sample of beneficiaries in the employer overall population.

RESULTS

Total annual, per capita, employer costs were approximately 5 times higher for patients with pneumonia ($11 544) than among typical beneficiaries in the employer overall population ($2368). The increases in costs were for all components (eg, medical care, prescription drug, disability, and particularly for inpatient services). A small proportion (10%) of pneumonia patients (almost all of whom were hospitalized) accounted for most (59%) of the costs.

CONCLUSIONS

Patients with pneumonia present an important financial burden to employers. These patients use more medical care services, particularly inpatient services, than the average beneficiary in the employer overall population. In addition to direct health care costs related to medical utilization and the use of prescription drugs, indirect costs due to disability and absenteeism also contribute to the high cost of pneumonia to an employer.

New methods and data sources for measuring economic consequences of workplace injuries

BACKGROUND

Evaluation of programs and policies to reduce the incidence of workplace injuries require that the consequences of injury are estimated correctly. Because workplace injuries are complex events, the availability of data that reflects this complexity is the largest obstacle to this estimation.

METHODS

We review the literature on the consequences of workplace injuries for both workers and employers, focusing on data sources, particularly linked administrative data from different public agencies. We also review other approaches to obtaining data to examine workplace injuries, including public-use longitudinal survey data, primary data collection, and linked employee-employer databases. We make suggestions for future research.

RESULTS

Recent advances in the literature on the economic consequences of workplace injuries for workers have been driven to a great extent by the availability of new data sources. Much remains unexplored. We find longitudinal survey databases including the National Longitudinal Survey of Youth, and the Health and Retirement Survey, to be very promising though largely untapped sources of data on workplace injuries. We also find that linked employee-employer databases are well suited for the study of consequences for employers.

CONCLUSIONS

We expect that new data sources should lead to rapid advances in our understanding of the economic consequences of workplace injuries for both workers and employers.

The cost of on-site versus off-site workplace urinalysis testing for illicit drug use

Workplace drug testing has become standard business practice in America. With increasing costs, however, many corporations look for more cost-effective testing alternatives. The study compared the cost of two testing strategies: urinalysis at the work site versus testing that occurs elsewhere. Employees from seven company locations were tested for illicit drugs. Four sites conducted the initial screening test at the workplace and three sites performed testing off site. On-site testing was found to have significantly lower variable costs, and total costs were lower once a threshold of 27 employees tested was attained. On-site testing also provided immediate access to negative test results, thereby facilitating personnel decisions.