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What Are Employers Doing To Create A Competitive Market For Health Care In The Twin Cities?

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  • ROGER FELDMAN
  • GAIL JENSEN
  • BRYAN DOWD

Abstract

Employers' willingness to control costs is a critical aspect of pro‐competition strategies for the health‐care market. Here, we present some of the first quantitative evidence of what employers do to control health‐care costs. Our sample is 44 large private and public employers in Minnesota. We develop a theoretical model in which the employer chooses cost‐control “innovations”—along with wages, fringe benefits, and labor‐force size—to maximize profits. The role of innovations is to reduce unit costs of offering fringe benefits. Our data are from a 1982 survey. Eighty percent of the surveyed employers, representing nearly 200,000 employees, responded. Most respondents offer both indemnity insurance plans and health‐maintenance organizations (HMOs). Many firms and individual health‐insurance plans conduct cost‐control activities, but less than half of the firms which offer HMOs have adopted level‐dollar premium contributions for their family health‐insurance policies. Few plans have increased their coinsurance and deductible requirements in the past five years. We use probit equations to estimate the probability that a firm or a health plan will adopt cost‐control activities. Our analysis suggests that many firms may soon make major plan‐design changes to control health‐care costs, although they have not yet done so.

Suggested Citation

  • Roger Feldman & Gail Jensen & Bryan Dowd, 1984. "What Are Employers Doing To Create A Competitive Market For Health Care In The Twin Cities?," Contemporary Economic Policy, Western Economic Association International, vol. 3(2), pages 69-88, December.
  • Handle: RePEc:bla:coecpo:v:3:y:1984:i:2:p:69-88
    DOI: 10.1111/j.1465-7287.1984.tb00798.x
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    References listed on IDEAS

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    1. Woodbury, Stephen A, 1983. "Substitution between Wage and Nonwage Benefits," American Economic Review, American Economic Association, vol. 73(1), pages 166-182, March.
    2. Gary S. Becker & H. Gregg Lewis, 1974. "Interaction between Quantity and Quality of Children," NBER Chapters, in: Economics of the Family: Marriage, Children, and Human Capital, pages 81-90, National Bureau of Economic Research, Inc.
    3. Roger D. Feldman & Bryan E. Dowd, 1982. "Simulation of a Health Insurance Market with Adverse Selection," Operations Research, INFORMS, vol. 30(6), pages 1027-1042, December.
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    Cited by:

    1. Louis De Alessi, 1989. "The Effect of Institutions on the Choices of Consumers and Providers of Health Care," Journal of Theoretical Politics, , vol. 1(4), pages 427-458, October.

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