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August 09, 2005
Study: Higher Health Insurance Premiums Lowers Job Growth
Cross-posted at My Left Wing
Although the conclusion that rising high health insurance premiums negatively impact hiring appears to be a no-brainer, it is good to have some solid empirical evidence to back-up this claim. Although universal health insurance is a simple humanitarian issue to many, it is also an issue of national competitiveness. US companies competing in the global market do so against companies who have some form of national health insurance. As a result, US companies have a higher cost of production than their overseas competitors. This places US companies at a severe competitive disadvantage in the international economy.
In addition, the private insurance system the US currently employs is clearly impeding domestic job growth. This hurts everybody. A higher-level of unemployment lowers overall wages for the labor force, increases state unemployment insurance payments and creates an atmosphere of concern about the economy’s health which lowers consumer spending and investment.
The study’s title is Effects of Rising Health Insurance Premiums. It was prepared by the National Bureau of Economic Research, which provides research for the Federal Reserve policy makers. Some of the study’s findings are presented below.
Every 10 percent increase in health insurance costs reduces the chances of being employed by 1.6 percent: This statistic alone is very revealing, especially considering health insurance premiums increased 59% since 2000. Therefore, the premium increases alone have reduced employment chances by 9.5%.
[rising premiums] also reduces hours worked by 1 percent as employers respond to rising health costs by converting full-time jobs to part-time positions, most of which do not include health benefits. Not only do rising premiums reduce the possibility of gaining employment, they also reduce the amount of money someone makes by reducing their number of hours. In addition, conversion of employment from full to part-time status usually results in lower benefits.
For workers who continue to get health insurance, more and more often, the increased price of premiums is coming out of their salary: a 10 percent increase in premiums is offset by a 2.3 percent decrease in wages. So, the 50% increase in premiums since 2000 has lowered pay 13.6% over the same period.
Particularly vulnerable, the authors observe, are low-wage hourly workers, because employers are legally constrained from how much they can reduce wages to accommodate a rise in health premiums. So, instead they may choose to just drop coverage altogether. Baicker and Chandra report that "workers who are paid hourly with a wage of less than $8 an hour are significantly more likely to lose health insurance as premiums rise." For hourly workers, "a ten percent increase in health insurance premiums results in a 3.8 percent reduction in the probability of being offered health insurance coverage."
Again, the 59% increase in health premiums has dramatic results, lowering the probability of obtaining employer-sponsored by 22.6%.
To conclude, the results of increasing health insurance premiums are drastic, far-reaching and are present throughout the employment cycle from hiring to discharge. Higher premiums lower the possibility of obtaining employment, lower the amount of hours a person works thereby lowering their pay and increase the total amount of people who have health insurance.
Posted by Hale Stewart at August 9, 2005 11:19 AM | Permalink
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