Employers Offer Health Benefits to

Attract and Retain Employees

Workers demand health insurance as a benefit because coverage purchased through an employer is less expensive than coverage purchased in the voluntary individual market.

Nevertheless, health care cost inflation has gradually changed the dynamics of the employment-based health care financing system. As health care costs have risen and become a larger component of total compensation, the focus of employment-based plans has moved from expanding coverage to containing costs. Moreover, rising health costs have begun to reduce the number of employers, especially small employers, who offer coverage as well as the number of workers who participate in their employer’s health plan.

Certain labor market realities somewhat mitigate this trend. Analysis of data from the 1996 Medical Expenditure Panel Survey (MEPS), suggests that employers offer benefits when faced by a highly competitive market for skilled workers: Indeed, the higher the educational level of the worker, the greater the likelihood of health insurance benefits.

Similarly, workers with higher weekly salaries are more likely to be offered coverage, and more likely to accept employment-based coverage when it is offered.  Over 90 percent of workers earning more than $500 a week are offered coverage, and over 90 percent of them accept it. In contrast, just over 30 percent of the workers who make less than $200 a week are offered coverage; of those low-wage workers, more than 40 percent decline coverage.

Other studies have found (Farber and Levy, 2000) that one of the consequences of health care cost inflation is that employers are more likely to offer health benefits only to their core employees. For example, employers are much more likely to offer coverage to fulltime rather than part-time workers; and those who work less than full time are not only less likely to be offered coverage but are more likely to decline that coverage if it is offered.

When compared to large employers, small employers face higher costs for providing the same benefits, and are therefore less likely to offer health insurance coverage to their employees. Consequently, small employers often attempt to attract workers who have health insurance coverage from other sources (those covered under someone else’s plan) or who do not value health insurance coverage (younger, healthier individuals).

The employers’ decision to offer coverage depends upon the workforce they wish to attract and the costs of offering coverage.

Contact us today to find out how to put together a cost effective healthcare plan for your company so you can attract and retain valuable employees!  Phone 708-645-2530