ERISA and health plans

This Issue Brief is designed to provide a basic understanding of the relationship of the Employee Retirement Income Security Act of 1974 (ERISA) to health plans. It is based, in part, on an Employee Benefit Research Institute-Education and Research Fund (EBRI-ERF) educational briefing held in March 1995. This report includes a section by Peter Schmidt of Arnold & Porter, a section about multiemployer plans written by Judy Mazo of The Segal Company; and a section about ERISA and state health reform written by Kala Ladenheim of the Intergovernmental Health Policy Project. Starting in the late 1980s, three trends converged to make ERISA a critical factor in state health reforms: increasingly comprehensive state health policy experimentation; changes in the makeup of the insurance market (including the rise in self-insurance and the growth of managed care); and increasingly expansive interpretations of ERISA by federal courts. The changing interpretations of ERISA's relationship to three categories of state health initiatives--insurance mandates, medical high risk pools, and uncompensated care pools--illustrate how these forces are playing out today. ERISA does have a very broad preemptive effect. Federal statutes do not need to say anything about preemption in order to preempt state law. For example, if there is a direct conflict, it would be quite clear under the Supremacy Clause [of the U.S. Constitution] that ERISA, or any federal statue, would preempt a directly conflicting state statute. States can indirectly regulate health care plans that provide benefits through insurance contracts by establishing the terms of the contract. And they also raise money by imposing premium taxes. But they cannot do the same with respect to self-funded plans. That is one of the factors that has caused a great rise in the number of self-funded plans. State regulation [of employee benefits] can create three kinds of problems: cost of taxes, fees, or other charges; cost of dealing with substantive, possibly inconsistent, benefit standards; and cost of identifying, understanding, and complying with the regulations themselves.     

Patterns of Intergenerational Transfers in Southeast Asia

This article explores motivations for intergenerational exchanges of time and money using data from Indonesia. The extent of exchange and underlying motivations differ across families but substantial evidence supports the theory that transfers within families serve as insurance for family members. The results also suggest that between some parents and children money is exchanged for time. Additionally, some evidence is consistent with the idea that parents pay for their children's education partly as a loan that is later repaid. The authors compare their results to those that they obtained previously for Malaysia using similar data and methods. The findings regarding motivations for transfers are remarkably similar across the two countries.     

Time Construction in Insurance Society

This article deals with the social meaning of insurance contracts in the late medieval and modern society. Starting from the empirical analysis of one of the early marine insurance contracts which were stipulated in the second half of the 14^th century, the hypothesis is suggested that the premium rate coincides with the estimated average frequency of sea accidents. By means of a proto‐probability calculus, rate was used by the early insurers for trading risks. Therefore the main thesis arises that insurance premium is a way of giving a certain price to the uncertainty of the future and that it indeed represents the cost of such observation. A comparison with the original function of money in primitive societies based on reciprocity is finally developed in order to explain how time construction is contingent on social structures.     

Perceptions of Financial Well-Being among American Women in Diverse Families

This study investigated the financial well-being of American women using data from a nationwide web survey of 368 women between the ages of 30 and 65 with household incomes of at least $40,000. Specifically, we examined perceptions of financial well-being among women with and without children who lived in different family forms including marriage, cohabitation, stepfamilies, as well as women who were single. The majority of women reported they had conservative buying behaviors, desired financial independence, had a somewhat negative view of their current financial situation, had worries about retirement and their financial futures, and considered long-term care insurance a necessity. Women in nontraditional families (single mothers, cohabitors, and stepfamilies) had significantly greater worries about their financial futures than women in first marriages. Single mothers were less likely to say that they had their financial house in order and were more likely to express concern that their money would not last through retirement. Cohabiting women were significantly more likely to express fears about becoming a burden. All three groups were more likely than women in first marriages to agree that long-term care insurance is a necessity. Women who were older, were more educated, had higher income, and who contributed more money to the household income had more positive perceptions of their financial situation.     

"Written All Over With Money" Earning, Spending, and Emotion in the Alcott Family

Abstract The article explores the nature and symbolism of money within familial relationships and the effect of close personal ties on money use in the example of the Alcott family. The historical moment is interesting precisely because many of the oppositions between money and sentiment, intimate and financial bonds were newly formulated in the 19th century. The Alcott family is an interesting case study because they articulated and documented both cultural understandings and actual practices concerning work, money, and emotions. Georg Simmel, Viviana Zelizer, and James Carrier's work inform the theoretical framework for this project.     

Using members’ dues for political purposes: The “paycheck protection” movement

Conclusion Both sides in the paycheck protection debate can make substantive, as opposed to political, arguments to support their positions. Supporters of paycheck protection measures argue that many workers disagree with the political positions their unions take, a point that is borne out by the scholarly research on members' attitudes towards politics. They contend that workers should have “the basic right to choose if and how their money is spent on political causes” (Kamburowski, 1998, p. 2). They further argue that ultimately it is an issue of fairness and choice and that “compelling workers to support causes they do not believe [in] violates the fundamental tenets of a free country” (Kamburowski, p. 2).     

A NOTE ON THE VANISHING LIQUIDITY EFFECT OF MONEY ON INTEREST

This paper provides a brief review and critique of some of the results and conclusions of Melvin [1983] concerning the effects of inflation on the response pattern of interest rates to changes in money growth rates. It also presents results concerning the significance of two different measures of the inflationary environment ––– the actual rate of inflation and the variance of the inflation rate ––– in explaining this response. The conclusion drawn here is that the variance of the inflation rate better explains the changing money-interest relationship. This conclusion is rather different from that of Melvin.     

The evolution of retirement: results of the 1999 Retirement Confidence Survey

The ninth annual Retirement Confidence Survey (RCS) shows continued evidence of progress in the drive for retirement income security for American workers. However, there are still hurdles to overcome. The RCS tracks Americans' retirement planning and saving behavior and their confidence regarding various aspects of their retirement. It also categorizes workers and retirees into distinct groups based on their individual views on retirement, retirement planning, and saving. The retirement envisioned by today's workers looks different in many respects from that now experienced by current retirees. Today's workers expect to work longer than current retirees actually worked before retiring--and many say they plan to work for pay after they retire. Twenty-four percent of workers reported that they are very confident they will have enough money to live comfortably in retirement, and 45 percent reported that they are somewhat confident. However, there are indications that many may be falsely confident. The good news is that 70 percent of Americans are saving for retirement, and a growing percentage (49 percent) are going further and determining how much they need to save to fund their retirement. The bad news is that 30 percent of Americans have not begun to save for their retirement, and 51 percent have never tried to determine how much they need to save. Employers play a major role in ensuring adequate retirement preparation. Forty percent of all workers said they expect that money provided by their employer will be a major source of retirement income. Forty-six percent expect the money they put into a retirement plan at work to be a major source of income. The availability of a retirement plan at work is credited by 48 percent of savers as motivation to save. While worker education is a point of emphasis among both employers and policymakers, more remains to be done. For example, 59 percent of workers expect to be eligible for full Social Security benefits sooner than they actually will be, and an additional 19 percent admit they do not know when they will be eligible. There is evidence that education can have an impact on individual behavior. Forty percent of workers receiving educational material at work in the last year said that information caused them to begin saving (19 percent) or resume saving (21 percent) for retirement, while 40 percent said they changed the amount they were contributing to a retirement savings plan and 41 percent changed the allocation of their money in a retirement savings plan.     

INFORMATIONAL IMPLICATIONS OF MONEY, INTEREST RATE, and PRICE RULES

The information available to private agents determines the effectiveness of various types of monetary policy. In an economy in which private agents have differential information sets, the ranking of three classes of monetary policy rules critically depends on the specification of agents' information sets. A price rule, for example, minimizes the variance of output around its full information level when agents observe both the interest rate and money stock. More generally, if all three monetary policy variables (the money stock, the price level and the interest rate) are contemporaneously observed, the policy ranking is indeterminate.     

Payroll taxes for social security in the United States: The future of fiscal and social policy illusions

This paper examines the validity of common assumptions about the basis of public support for the U.S. social security program. Various rationales for the social insurance approach are summarized and critically assessed. A review of public opinion surveys from 1935–1981 shows: (1) the distinction between social insurance and public assistance was not regarded as important by the public in the program's early years; (2) most Americans are now aware that the system operates on a pay-as-you-go basis; (3) there is widespread feeling that social security payroll taxes are too high, but at the same time a majority of the population thinks program benefits should be maintained or increased; and (4) serious doubt about the program's future is widespread, with many workers believing that there will not be sufficient money left for their own pensions when they retire. The paper concludes that the explanation of social security's enduring popular appeal and the phenomenon of mass toleration of rising payroll taxes is more closely tied to the perception that the program serves a deserving clientele, rather than a result of the social insurance approach.     

The retirement system in transition: the 2007 Retirement Confidence Survey

WORKERS SLOW TO SEE OR ADAPT TO A CHANGING U.S. RETIREMENT SYSTEM: The 17th annual wave of the Retirement Confidence Survey (RCS) suggests that American workers may be slow to recognize how the U.S. retirement system is changing, and those who are aware of these changes may not be adapting to them in ways that are likely to secure them a comfortable retirement. HALF OF WORKERS LESS CONFIDENT ABOUT PENSION BENEFITS: The RCS finds pension-plan changes by employers have left nearly half of workers less confident about the benefits they will receive from a traditional pension plan, but that those experiencing a decline in retirement benefits often fail to react constructively. Moreover, although Americans will rely increasingly on 401(k) retirement savings plans and other personal savings and investments to fund their retirement security, data suggest that many may not follow professional investment advice when it is offered to them. MANY WORKERS COUNTING ON BENEFITS THAT WON'T BE THERE: Many workers are counting on employer-provided benefits in retirement that are increasingly unavailable. Only 41 percent of workers indicate they or their spouse currently have a defined benefit pension plan, yet 62 percent say they are expecting to receive income from such a plan in retirement. Likewise, workers are as likely to expect as retirees are to receive retiree health insurance through an employer, even though the number of employers offering this benefit to future retirees is declining. MANY WORKERS UNLIKELY TO HEED INVESTMENT ADVICE EVEN IF THEY GET IT: More than half of workers indicate they would be likely to take advantage of professional investment advice offered by companies that manage employer-sponsored retirement plans. However, two-thirds of these workers say they would probably implement only some of the recommendations they receive and 1 in 10 think they would implement none of them. AMERICANS OVERESTIMATE LONG-TERM CARE COVERAGE: One-quarter of workers and more than one-third of retirees report they have long-term care insurance (separate from health insurance, Medicare, and Medicaid) to help pay for care they might need in a nursing home, assisted living facility, or at home. But only 10 percent of Americans age 65 and older are estimated to have had private long-term care insurance in 2002, suggesting that many are counting on coverage they do not actually have. MOST SAVINGS LEVELS ARE MODEST: Almost half of workers saving for retirement report total savings and investments (not including the value of their primary residence or any defined benefit plans) of less than $25,000. The majority of workers who have not put money aside for retirement have little in savings at all: Seven in 10 of these workers say their assets total less than $10,000. CONTINUED IGNORANCE ABOUT SOCIAL SECURITY COVERAGE: Despite the longstanding increase in the eligibility age for Social Security, only a small minority of workers are aware of the age at which they can receive full retirement benefits from Social Security without a reduction for early retirement.     

INVOLUNTARY, EMPLOYMENT IN CONTRACTS WITH RISKY JOB SEARCH

The implication of partially insurable job search risk for incentive compatibility in a standard contracting framework are explored. When unemployment spells provoke job search, workers face risk in spell duration and reemployment wages. When search effort is not variable, contracts including unemployment insurance will yield involuntary employment. When search effort is diminished by UI benefits, firms shift some compensation back to wages, increasing the relative attractiveness of employment. The analysis begins with a theorem on incomplete insurance by Imai, Geanakoplos and Ito [1981] for which a simple proof and economic intuition are provided.     

Sharing a resource with concave benefits

A group of agents are collectively entitled to a perfectly divisible good or resource. They enjoy concave and satiable benefit functions from consuming it. They also value money (transfers). The resource is scarce in the sense that not everybody can consume its satiated consumption level. This paper characterizes the unique (resource and money) allocation that is efficient, incentive-compatible and equal-sharing individual rational. It then discusses its implementation and its link with other axioms.     

Students Left Behind: The Limitations of University-Based Health Insurance for Students With Mental Illnesses

Abstract

A growing trend in college and university health care is the requirement that students demonstrate proof of health insurance prior to enrollment. An increasing number of schools are contracting with insurance companies to provide students with school-based options for health insurance. Although this is advantageous to students in some ways, tying health insurance coverage to school enrollment can leave students vulnerable when they are most in need of help. Students whose health insurance is contingent upon their enrollment face significant lapses in coverage when they are required to leave school. This is especially challenging for students with mental illnesses whose treatment needs often go unmet in the absence of that coverage. The limitations in this system must be addressed as an increasing number of universities and students opt for university-based health insurance plans.     

Compulsive buying: Does it matter how it’s measured?

The primary purpose of the present study is to compare and contrast the validity and reliability of the Faber and O’Guinn [Faber, R. J., & O’Guinn, T. C. (1992). A clinical screener for compulsive buying. Journal of Consumer Research, 19, 459–469] and Edwards [Edwards, E. A. (1993). Development of a new scale for measuring compulsive buying behavior. Financial Counseling and Planning, 4, 67–84] compulsive buying scales within a nomological network. Although both psychometric scales were designed to measure compulsive buying, the two instruments appear to be distinct in how they conceptualize the compulsive buying phenomenon. The seven-item compulsive buying scale developed by Faber and O’Guinn (1992) is the most commonly used scale for measuring compulsive buying. The Edwards scale in contrast is not as well-known. Empirical results of the present study suggest that the two compulsive buying scales may be capturing either separate constructs, or different dimensions of the same compulsive buying construct. Edwards (1993) compulsive buying scale, for instance, is correlated with materialism but not with attitudes toward money while the Faber and O’Guinn scale is not correlated with materialism but is correlated with attitudes toward money. The present study’s results suggest, among other things, that it does in fact appear to matter how compulsive buying is measured.     

OVEREXPANSION IN THE SOCIAL INSURANCE BUDGET AND THE CONSTITUTIONAL PERSPECTIVE

Browning (1975) has recently reasoned that the social insurance budget is inevitably too large in a democracy. The purpose of this paper is to argue that there are different conceptual contexts within which the correct size of the social insurance budget can be analyzed. Within at least one relevant context it is not at all obvious that the social insurance budget must inevitably be too large in a democracy, The first part of this paper reviews Browning's argument. The second presents an alternative analysis which leads to the conclusion that the social insurance system may well have certain characteristics that work toward the maintenance of an efficient budget level.     

On the Use of Differing Money Transmission Methods by Mexican Immigrants1

Interest in the factors shapin migrants’use of a given money transmittal method has recently intensifiled following researchers’agreement on the often inadequate infrastructure surrounding remittances transfers. This concern has also captured the attention of government officials, who appear more eager to promote more efficient and safe transfers of emigrant's earnings given the otential that remittances hold for increasing resources at the disposal of receiving nations. This study uses data from Mexican immigrants who have resided in the United States to examine the various factors that shape migrants’use of the various methods to remit earnings to Mexico. We find, not surprisingly, that accessibility factors play a key role in explaining migrants’use of the various moneytransfer mechanisms. Migrants are less likely to use banks and more likely to use nonbank money‐transmitting services when they lack immigration documents. Additionally, migrants’awareness of alternative remitting methods, either through educational attainment, skill level, or networks of friends and family in the city to which they migrated, makes them more likely to use banks relative to the more expensive nonbank money‐transmittin mechanisms. In contrast, the use of informal money transfer mechanisms (cash in the mail and hand‐carried transfers) is more likely among workers with “less regular” employment ‐ such as self‐employed and specific‐task workers, more newly arrived migrants, and migrants remitting to rural and poorer areas.     

Gambling among lottery winners: Before and after the big score

The proliferation of state lotteries raises the possibility of increasing pathological gambling because large segments of the population are purchasing tickets. This study, based on a 50% response rate of million dollar winners in Ohio in 1986, indicates lottery winners spend relatively small amounts of money on tickets, did not appreciably increase the amount of money they spent on tickets after winning, and rarely engaged in other forms of gambling before or after they won. These data do not support the assumption that lotteries significantly increase the amount of compulsive gambling in our society, but the subject deserves further exploration.     

The Final Instance - Unemployment Insurance Going Private? A Study of a Future Social Security Scenario in the UK and Germany

This paper explores the scope for privatizing unemployment insurance in Britain and Germany. The research builds on two consecutive projects, undertaken in the two countries between 1996 and 2000. The studies investigated people's attitudes towards the welfare state and private insurance, and families' strategies to manage the financial risk of unemployment. About 6% of the working population of both Britain and Germany claimed to possess private unemployment insurance. A further 23% in Britain and 12% in Germany expressed an intention to acquire private unemployment insurance. Attitudes towards private unemployment insurance were influenced by perceptions of unemployment risk, household circumstances, private money management strategies, and perceptions of the welfare state and the efficiency and trustworthiness of its institutions. The risk of exclusion from insurance in the two countries, either voluntary or as a result of actuarial risk assessment, is investigated. There is at present little evidence of adverse selection, nor would an expansion of the private unemployment insurance market necessarily entail that risk. However, the study found some, albeit limited, evidence of moral hazard. Significant country-specific differences were apparent in all aspects of the study.