Fast Focus
	Employer-sponsored health insurance creates stable risk pools because healthy employees are less likely to jump ship.
	Insurers can craft more generous health plans for employers with a stable workforce.

Stable Relations

Compelling reseach finds it's the healthy who distort the insurance market, and employer-sponsored health insurance plans are the best cure.

By  Keith Crocker and John Moran

[Page 6 of 7]

Economists’ groundbreaking study is first to show employer sponsorship of health plans is the key to quality health insurance.

Economists Keith Crocker and John Moran collected data on employment-based health insurance contracts, along with information on key firm and worker characteristics, for roughly 2000 U.S. employers drawn from the 1987 National Medical Expenditure Survey, a large, nationally representative sample of the civilian, non-institutionalized population of the United States sponsored by the U.S. Department of Health and Human Services. These data were combined with a proxy for job attachment from the 1977 Dictionary of Occupational Titles, a publication of the U.S. Department of Labor which provides information on the physical demands, environmental conditions, and educational and vocational preparation associated with each of 12,000 occupations.

Using multivariate linear regression methods to control for firm- and worker-level factors that might otherwise confound the relationship between job attachment and the quality of health insurance, they found that firms with more job attachment offered more generous health insurance benefits, as measured by two key contract provisions: the maximum lifetime dollar benefit and the annual stop loss. To test the validity of their initial findings, they conducted a number of specification checks, including one based on a control group of firms that would not be expected to exhibit as strong a relationship between job attachment and insurance generosity. In each case, the data were consistent with a simple economic model of how group health insurance contracts adapt to differences in the long-term stability of employer-sponsored risk pools.

Their article, titled Contracting with Limited Commitment:Evidence from Employment-Based Health Insurance Contracts, can be read in its entirety in the Winter 2003 issue of the Rur

Blame It on the Healthy

Individual market is more expensive, more taxing, more misunderstood.

By Molly Butler Hart

Don Quixote sang of the impossible dream in the Broadway musical “Man of La Mancha” to explain to Dulcinea his quest for the unreachable star. Today he could just as easily have been describing the quest to find an affordable health insurance policy in the individual market—for if not an impossible dream, it is at the least an anxiety attack for those who are in the market.

Conquering the individual health insurance market is daunting and drives home the point of how important employer group plans are to insuring most Americans.

“For anyone who is not young and healthy already, securing health insurance in the individual market is the impossible dream,” says lawyer Jennifer Jaff, founder of Advocacy for Patients with Chronic Illness.

Several years ago Jaff was housebound following surgery for an intestinal blockage related to Crohn’s disease. She went through the challenge of finding her own health insurance, settling on the Municipal Employees Health Insurance Program, offered by the state of Connecticut to cover small-business owners as part of a plan for state employees. But premiums doubled from $400 to $800 a month in just three years. She, like many Americans, worries about what will happen when next year’s premium increase rolls around. “My health could bankrupt me,” she says.

Jaff is full of horror stories of chronically ill individuals who are unable to obtain coverage or who are finding their carriers curtailing coverage. Her stories put a face on the problem of the individual market versus the employer-backed group market.