Let's put consumers in charge of health care

Businesses spend billions on health insurance. And what do they get for their money? A lot of unhappy employees. Workers fret about the quality of the care they receive, the burden of their out-of-pocket expenses, and the gaps in their coverage. For businesses, health care has become a lose-lose proposition: They pay way too much, and they get way too little. The problem is that the health care industry has been shielded from consumer pressure--by employers, insurers, and the government. As a result, costs have exploded even as choices have narrowed. But if companies embrace a new model of health coverage--one that places control over both costs and care directly into the hands of employees--the competitive forces that spur productivity and innovation in consumer markets can be loosed upon the inefficient, tradition-bound health care system. Moving to consumer-driven health care requires that companies revamp their health benefits in six ways: Give employees incentives to shop intelligently; offer a real choice of insurance plans; charge employees prices that accurately reflect the company's costs; let providers set their own prices; adjust payments for each enrollee based on need; and provide relevant information. Putting consumers in charge of health care may seem like a radical approach. But individuals are highly motivated to educate themselves about their health, their insurance, and their care, and they want to seek the most value for their money. Promoting that economic dynamic--the same that fuels consumer markets everywhere--is the best way to enhance the health care industry's productivity and quality.     

Ein Risikoausgleichsmodell für den Wettbewerb um Bestandskunden in der PKV

The capital funded health insurance system in Germany (the PKV) is afflicted with a lack of competition because insurants lose their ageing provisions if they switch their insurer. So far an adequate model for the transfer of ageing provisions regarding economic as well as actuarial aspects is missing. In this paper we develop a model for the transfer of ageing provisions in the German PKV, which is consequently based on the existing calculation methods. We show the necessity of a new risk adjustment reserve providing a signal for the the risk level of health insurance collectives. From a calculative point of view, the risk adjustment reserve is connected with the basis for actuarial calculation of the PKV collectives. Further studies should concentrate on quantifications of the derived model components.     

How companies tackle health care costs: Part II.

In this continuing examination of responses to the growing costs of health care, based on a survey of more than 200 large companies, the author discusses the results of employers' efforts to trim these expenses. Most companies have chosen to meet the cost-cutting challenge by changing demand--that is, by redesigning their health insurance policies--and by changing the suppliers of health care services. After a critical analysis of these mechanisms, the author concludes that most of these strategies do little more than shift the costs from one payer to the next. To affect the total cost of the system, she maintains the business sector must use its power to bring about changes in the reimbursement of providers and in the underlying structure of the health care system.     

Culture, infrastructure and international health benefits delivery

When selecting a health insurance carrier for international employees, it is advantageous to recognize that valid assumptions made when selecting domestic benefits simply do not apply in the international realm and can lead to costly errors. This article examines some scenarios and cultural anomalies that invalidate commonly accepted domestic health insurance practices. It explores strategies for simplifying benefit design, providing access to quality care abroad, assessing costs, minimizing overseas risks and understanding the cultural impact on health care delivery.     

Employer Health Insurance Mandates and the Risk of Unemployment

Employer health insurance mandates form the basis of many health care reform proposals. Proponents make the case that they will increase insurance, while opponents raise the concern that low-wage workers will see offsetting reductions in their wages and that in the presence of minimum wage laws some of the lowest wage workers will become unemployed. We construct an estimate of the number of workers whose wages are so close to the minimum wage that they cannot be lowered to absorb the cost of health insurance, using detailed data on wages, health insurance, and demographics from the Current Population Survey (CPS). We find that 33 percent of uninsured workers earn within $3 of the minimum wage, putting them at risk of unemployment if their employers were required to offer insurance. Assuming an elasticity of employment with respect to minimum wage increase of -0.10, we estimate that 0.2 percent of all full-time workers and 1.4 percent of uninsured full-time workers would lose their jobs because of a health insurance mandate. Workers who would lose their jobs are disproportionately likely to be high school dropouts, minority, and female. This risk of unemployment should be a crucial component in the evaluation of both the effectiveness and distributional implications of these policies relative to alternatives such as tax credits, Medicaid expansions, and individual mandates, and their broader effects on the well-being of low-wage workers.     

失业保险与公司财务杠杆

我国劳动力市场化程度日益加深导致劳动者职业转换愈加频繁,失业保险的作用日益突出。本文探究了失业保险金水平对企业财务杠杆的影响。运用2009—2019年上市公司数据进行实证分析,结果发现失业保险金上升会导致公司财务杠杆下降。渠道检验显示,提高失业保险金可以降低员工失业风险溢酬,公司劳动力成本下降,公司有更多自由现金流和盈利进行内源融资和偿还债务,公司财务杠杆下降。进一步分析发现,失业保险金的作用在失业率高的地区更加显著。主要结果在分别运用《社会保险法》和《关于调整失业保险金标准的指导意见》构造双重差分模型和工具变量解决内生性问题、更改模型设置、排除投资水平影响、删除特殊省份、更换样本期间后,依然成立。本文结果说明加大失业保险保障力度有助于降低企业财务风险。     

Die Diskussion über die Portabilität von risikogerechten Transferbeträgen in der Privaten Krankenversicherung

The capital funded health insurance system in Germany (the PKV) is afflicted with a lack of competition because insurants loose their ageing provisions if they switch their insurer. This leads to prohibitive switching costs even after few years of insurance. An intensified competition can only be achieved by transferring ageing provisions with the switch-over. But this raises complex economic and actuarial questions.The article starts with a motivation of the appropriateness of calculative ageing provisions. These quantities can be transferred. A further amount has to be transferred in order to avoid risk selection. Central requests for a mechanism to determine such risk adjustment amounts are derived. After that, options for an implementation are lined out.     

“Understanding Relationships Using Copulas,” by Edward Frees and Emiliano Valdez,January 1998

Presenteeism occurs when employees are present at the workplace but cannot perform at their best because of ill-health or other reasons, while absenteeism occurs when employees are absent from the workplace. Although absenteeism is important, researchers now say presenteeism can be more costly to businesses and may be responsible for as much as three times the health-related lost productivity as compared to absenteeism and may cost the U.S. economy as much as $150 billion per year. Given the cost of absenteeism and presenteeism, one of the objectives of this article is to provide actuaries with the techniques and insights needed to design disability insurance policies that take into account the dynamics of absenteeism and presenteeism. To this end we develop a simple multistate sickness-disability model of the evolution of an employee’s health over time. We assume employees receive sick pay, the size of which depends on their health state, and there is a government-sponsored unemployment insurance program. In our model it is possible for employees in good health to avoid work by staying home, which is called shirking. To reduce shirking, the employer decides to check the health status of a certain percentage of employees who “call in sick.” Given the sick-pay structure, the probability of a health check, and the existence of unemployment insurance, employees develop rational strategies about whether to engage in shirking, absenteeism, or presenteeism. These strategies are captured in a set of Volterra integral equations. We use these Volterra integral equations to show how the employer can design a disability insurance plan that can incentivise employees to eliminate shirking and to act in a manner that will maximize the employer’s expected profits.     

Has Financial Regulation Been a Flop? (or How to Reform Dodd‐Frank)

Recent bank regulations have imposed large compliance costs on banks of all sizes, and have increased the costs of borrowing to both consumers and companies. But in this summary of his recent book, the author argues that the problems with banking system regulation go well beyond the excessive costs. Indeed, Dodd‐Frank and other post‐crisis regulatory reforms have failed to address the major shortcomings that produced the crisis of 2007–2009. Most importantly, excessive housing finance risk was not dealt with adequately, and is already on the rise again. And prudential standards for banks, while much stricter, remain unreliable in a severe economic downturn. After providing evidence of the shortcomings of major parts of the regulatory structure created after 2008, the author points to fundamental problems in the thinking underlying the post‐crisis regulatory changes that made those reforms unlikely to succeed. Moreover, he argues that the new processes of financial regulation have fostered many abuses of the rule of law, which have politicized regulation, adding to its cost and discrediting important supervisory and regulatory agencies. The author suggests that simpler, more effective, less costly, and more respectable approaches to regulation are possible. He offers a set of principles to guide reform and proposes over 20 specific actions that would enhance the effectiveness, reduce the costs, and improve the processes of bank regulation.     

Almost ready: how leaders move up

Most designated CEO successors are talented, hardworking, and smart enough to go all the way--yet fail to land the top job. What they don't realize is, the qualities that helped them in their climb to the number two position aren't enough to boost them to number one. In addition to running their businesses well, the author explains, would-be CEOs must master the art of forming coalitions and winning support. They must also sharpen their self-awareness and their sensitivity to the needs of bosses and influential peers because they typically receive little performance feedback once they're on track to become CEO. Indeed, the ability to pick up on subtle cues is often an important part of the test. When succession doesn't go well--or fails altogether--many people pay the price: employees depending on a smooth handoff at the top, investors expecting continuous leadership, and families uprooted when jobs don't pan out. Among those at fault are boards that do not keep a close watch on the succession process, human resource organizations that should have the capacity to help but are not up to the task, and CEOs who do a poor job coaching potential successors. But the aspiring CEO also bears some responsibility. He can dramatically increase his chances of success by understanding his boss's point of view, knowing his own limitations, and managing what psychologist Gerry Egan has called the "shadow organization"--the political side of a company, characterized by unspoken relationships and alliances--without being labeled "political." Most of all, he must learn to conduct himself with a level of maturity and wisdom that signals he is ready--not almost ready--to be chief executive.     

The Effects of Offering Health Plan Choice Within Employment-Based Purchasing Groups

Employers may offer employees a choice of health plans either to promote competition among plans or to better cater to employee preferences for different types of products. This article examines whether the relationship between the availability of choice and insurance costs and coverage are consistent with these models of employer behavior. The results indicate that employers who offer choice have lower average premiums, primarily because employees are enrolled in less generous plans, and cover a greater proportion of workers than those who do not. The results are consistent with employers offering choice to accommodate diverse worker preferences.     

Changing employee values: deepening discontent?

This article presents a synthesis of data on employee attitudes gathered over the last 25 years. Most of the findings confirm the hypothesis that employees are discontented and expect more from their jobs now than they have in the past. While managerial satisfaction has remained relatively constant, the work satisfaction among hourly and clerical employees has sharply decreased. The authors attribute dissatisfaction to changes in the expectations and values of employees and warn that the deterioration of work attitudes may result in increased operating costs due to poor quality work, reduced output, absenteeism, etc. Instituting an employer attitude survey is suggested as a means of improving communication between management and employees and increasing job satisfaction.     

Das Hamburger Beihilfemodell – Ein Vergleich der internen Renditen von GKV und PKV

At the beginning of their career civil servants in Germany can choose between the social health insurance system and a private plan combined with a direct reimbursement of the government up to 80%. Most civil servants chose the latter, also because they have to cover all contribution payments to the social system themselves, while normal employees get nearly 50% from their employers. The state of Hamburg decided to change the system by paying a share of the contributions if civil servants choose the social plan. Using a comparison of internal rates of return in both schemes, we show that this celebrated reform will not change the decision calculus for the average civil servant household and will probably thereby increase the adverse selection of high risk cases towards the social health insurance.     

The effect of retaliation costs on employee whistleblowing

We use large increases in unemployment insurance (UI) benefits to study the effects of expected retaliation costs on employee whistleblowing. Increases in UI benefits reduce the costs that arise from a job loss, one of the costliest forms of retaliation. We find that increases in UI benefits increase the number of facility-level employee workplace safety complaints filed with the regulator. Furthermore, UI benefit increases also result in more violations and more penalties. The effects are concentrated in firms where retaliation is more likely as measured by weaker employee relations, internal controls, and monitoring. Our findings show the importance of reducing retaliation costs to tap into employees’ knowledge of misconduct.     

The Impact of the Health Insurance Market on Small Firm Employment

Small firms that offer health insurance to their employees may face variable premiums if they hire employees with high expected health costs. To avoid expensive premium variability, small firms may attempt to maintain a workforce with low expected health costs. This results in employment distortions. I examine the magnitude of these employment distortions using the 1987 National Medical Expenditure Survey and the 1996 Medical Expenditure Panel Survey. Based on the underwriting behavior of insurance companies in 1988, I classify medical conditions into three categories: conditions that led to denial of coverage; conditions that led to exclusion restrictions; and, conditions that led to higher premiums. In 1987, I find that insured small firms were less likely to employ workers with families that had conditions that led to higher premiums than insured large firms. However, in 1996, possibly due to the passage of small group health insurance reforms that restrict insurers' ability to exclude or deny coverage, insured small firms were less likely to employ workers with denial conditions compared to insured large firms. These results suggest that the pattern of employment distortions in insured small firms is consistent with the evolving small group health insurance market.     

Die Mitgliedschaft EG-ausländischer Versicherungsunternehmen im Sicherungsfond der Lebens- und Krankenversicherung

The present regulation of the German guarantee funds for life and health insurance offers no possibility for insurance enterprises from other memberstates of the EC to become a member of these funds. Whereas an obligatory membership for EC-foreign insurance enterprises would violate the single-license-principle for financial supervision in the EC, community law requires a possibility to become a member of the German guarantee funds on a voluntary basis. The absence of the possibility of such a voluntary membership in the German insurance supervision law leads to an inadmissible restriction of the fundamental economic freedom rights of the common market. Therefore, the German legislator has to add the possibility of a voluntary membership to his national regulation of the guarantee funds to secure an undistorted competition on the common market for insurance in the EC.     

Controlling human capital costs in the new millennium

Low productivity and high turnover can be more costly to employers than insurance premiums and medical claims. This article discusses the need for coordinated management of all behavioral health benefits. It provides two case studies that illustrate how such coordination can avert possible long-term costs and loss of a valued employee.     

Asymmetric Information, Long-Term Care Insurance, and Annuities: The Case for Bundled Contracts

This article examines the markets for long-term care insurance and annuities when there is asymmetric information and there are costs of administering contracts. Individuals differ in terms of their risk aversion. Risk-averse individuals take more care of their health and are relatively high risk in the annuities market and relatively low risk in the long-term care insurance market. In the long-term care insurance market, both separating and partial-pooling equilibria are possible. However, in the stand-alone annuity market, only separating equilibria are possible. We show, consistent with the extant empirical research, that in the presence of administration costs the more risk-averse individuals may buy relatively more long-term care insurance and more annuity coverage. Under the same assumptions, we show that equilibria exist with bundled contracts that Pareto dominate the outcomes with stand-alone contracts and are robust to competition from stand-alone contracts. The remaining empirical puzzle is to explain why bundled contracts are such a small share of the voluntary annuity market.     

Examining the Marginal Access Value of Private Health Insurance

According to a new theory advanced by Nyman (1999, 2003) , an important access motivation underlies the demand for health insurance. However, little empirical research has attempted to quantify and explain changes in the access value of health insurance. By assuming the demand for health insurance is derived from the demand for good health, this article shows mathematically that the marginal access value of private health insurance can be reasonably indexed by dividing the price of health insurance by a composite measure of medical prices. For the period from 1960 through 2002, national data for the United States suggests that the marginal access value of private health insurance has tended to increase over time. Based upon multiple regression analysis, marginal access value is shown to have increased over time in response to rising income, more generous benefit coverage, new medical technologies, and, in recent years, the backlash against health maintenance organizations (HMOs). In addition, expansions in the Medicaid program are shown to have slowed the growth of the marginal access value of private health insurance.