Sponsored by The Robert Wood Johnson Foundation's State Coverage Initiatives Program
Conducted by AcademyHealth

Q: Please clarify the trend that Mr. Gabel mentioned that more employers are offering health insurance for the first time.

A: [Gabel] Compared to 1989, among small firms, there are more small firms percentage-wise offering health insurance. Small employers, however, are very difficult to survey and have a particularly low response rate. This is especially true for the very small firms (<25 employees).

[Nichols] This trend also matches the point that I made in my presentation that the main reason for offering insurance is to attract workers. The job market has grown tighter and tighter and employers have needed to offer coverage in order to attract much needed labor.

Q: Is there any correlation between offer rates and number of mandates? What is the prevalence of employers who ask to see proof of insurance in order for an employee to turn down insurance? What is the prevalence of employers subsidizing low-income workers at a higher level than higher income workers?

A: [Nichols] There is little correlation of offer rates to mandates. Since most employers already offer those mandated benefits, they merely anger some people but do not raise premium rates. In regards to your first question, we have not done much research on that, but I can tell you that insurers for small firms often require a 75 percent take-up rate.

[Gabel] On the third question, our survey shows that less than one percent of workers had income-related deductibles or income-related premiums. On the second question, I believe the rhetoric on benefits mandates is greatly over-stated.

Q: State policymakers are nervous about increased cost and cost-shifting to employees and the effect on take-up. How many years of double-digit premium increases can employees bear before such a shift occurs?

A: [Gabel] I believe that it is only a matter of time when unemployment rates rise and health insurance will no longer be necessary to attract employees.

[Nichols] Firms offer insurance to compete for workers by reducing employees' wages. Therefore, when workers get frustrated that they are no longer getting the pay raises to cover the cost-shifting, take-up rates may decrease.

Q: Why is the elasticity of demand for health insurance for the self-employed higher?

A: [Nichols] There appears to be something special about the human nature of a self-employed individual. They seem to be risk-takers as indicated in their decision to self-employ. In this way, they are more likely to alter their coverage status in response to price changes.

Q: How has cost-sharing changed over time?

A: [Gabel] I am convinced that Americans are paying a smaller share of their health care bill than ever before. I did a study comparing 1991 and 1997 consumer expenditures and it showed a decline in what Americans paid out-of-pocket. I feel the major reason for this is the switch from indemnity to HMO coverage. This is particularly true not for premiums but for co-insurance, deductibles, and uncovered expenses. Coverage is better in most areas except for mental health and substance abuse coverage.

Q: In your research on copays, has the trend for pharmaceutical copays been equally as flat as other services?

A: [Gabel] Our data from 2001 will show a dramatic increase in pharmaceutical copays.
Note: The data will be published in a forthcoming Health Affairs article.

Q: Even though prescription drug costs appear to have increased the cost of claims, might the prescription drug companies say that these same prescriptions have caused hospital stays to decrease?

A: [Gabel] No published study that I know of shows this connection.

Q: I am from Georgia where some legislators want a small-employer buy-in to the state employees' plan. Should we be worried about crowd-out if this occurs?

A: [Nichols] Workers tend to be healthy. Small firm employees tend to be very healthy. Therefore, they may not affect the risk pool as much as one may think. A positive result may be that these small employers can take advantage of the state's economies of scale.

Q: Jon Gabel, please clarify what is meant by the term "defined contribution?"

A: [Gabel] There is no single definition. Instead, it is a continuum of philosophies between two extremes. On one extreme, give employees money and allow them to buy health insurance. On the other end is a plan that gives a fixed absolute contribution and the employee bears the financial risk if he/she chooses a more expensive plan. The bottom line is that it involves transferring more financial risk to the employee.

Q: With regard to Len Nichols' state variation figures, what database did they come from?

A: Much of the information came from the Agency for Healthcare Research and Quality Web site at www.ahrq.gov under "MEPS," "Survey Instruments," and then "IC" for Insurance Component.