Employer-sponsored long-term care insurance: best practices for increasing sponsorship

Behind the enthusiasm of policymakers for long-term care (LTC) insurance is the belief that increased ownership of private LTC insurance will reduce the government's future liability for financing the nation's LTC needs, currently projected by the Congressional Budget Office to increase by 2.6 percent annually between 2000 and 2040. Some observers say that sustained economic growth could keep these increased expenditures at the same share of total GDP; others argue that current federal expenditure trends will become unsustainable without large tax increases. The potential of the employer-sponsored group LTC market to stave off a national LTC financing crisis has recently started to receive popular notice in the news media. However, for the potential of the group LTC market to be realized, there must be widespread employer sponsorship of group LTC plans and significant participation levels among eligible employees in these plans. The present analysis of industry data estimates the LTC plan sponsorship rate for all U.S. employers with 10 or more employees at 0.2 percent. The sponsorship rate among large employers is significantly higher (8.7 percent). The greatest growth opportunities are projected to lie in the smaller employer market, because it is enormous and virtually untapped. Nonsponsors cite a variety of barriers to employer sponsorship of LTC plans. For many nonsponsors, the most important obstacles are the intrinsic characteristics of their work forces: employees are too young, transient, part-time, and/or low-income to be suitable for LTC insurance. For many others, lack of awareness and low priority are the primary obstacles. Because group LTC insurance has been widely available for only 10 years, many benefits managers view it as "too new and untested." Prior to the passage of the Health Insurance Portability and Accountability Act (HIPAA), in August 1996, the tax treatment of long-term care insurance premiums was unclear because Congress had not addressed the issue and the Internal Revenue Service had not issued clear guidance. In essence, HIPAA served to clarify the tax status of LTC insurance and establish product criteria for tax qualification. The interventions contained in HIPAA appear to have been insufficient to stimulate coverage growth rates that will meaningfully reduced the future burden on government financing of LTC. Although employment-based LTC insurance appears to be the best mechanism for mass expansion of coverage at affordable rates, the data suggest that employer sponsorship of LTC plans is relatively rare, especially among smaller employers, and that sponsorship rates may not dramatically increase without significant investments in employer education and new incentives.     

The ongoing growth of defined contribution and individual account plans: issues and implications

This Issue Brief discusses the implications of the growth of defined contribution (DC) retirement plans and individual account plans and the subsequent impact on employers, employees, and retirement planning. It also presents a look at data regarding contributions to retirement plans, employer trends regarding retirement plans, and the potential impact of changes to the federal Social Security retirement system. The findings and data in this article are drawn from material presented at a policy forum sponsored by the Employee Benefit Research Institute Education and Research Fund (EBRI-ERF) Dec. 7, 2001, in Washington, DC. Today, prospective retirees need to be able to generate about 75 percent of their current income to maintain their standard of living in retirement, up from 63 percent of their income in 1997, according to the Replacement Ratio Study, by Aon Corporation and Georgia State University. However, the most recent data show a decline in the percentage of income that average employees are saving. While it is too early to quantify, it does not appear that the retirement provisions in the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) are strongly influencing the movement to DC plans. However, employers appear very interested in the provisions of the new law with regard to both defined benefit (DB) retirement plans and DC plans. The number of large employers offering DB plans continues to decline, from 85 percent in 1990 to 73 percent in 2000, according to the Hewitt study. Although employers may have little influence over some factors that affect participation rates in voluntary retirement plans, they have various options to increase participation rates, such as "matching" employee contributions, offering loan features, and providing education to employees about the plans.     

Defined contribution health benefits

This Issue Brief discusses the emerging issue of "defined contribution" (DC) health benefits. The term "defined contribution" is used to describe a wide variety of approaches to the provision of health benefits, all of which have in common a shift in the responsibility for payment and selection of health care services from employers to employees. DC health benefits often are mentioned in the context of enabling employers to control their outlay for health benefits by avoiding increases in health care costs. DC health benefits may also shift responsibility for choosing a health plan and the associated risks of choosing a plan from employers to employees. There are three primary reasons why some employers currently are considering some sort of DC approach. First, they are once again looking for ways to keep their health care cost increases in line with overall inflation. Second, some employers are concerned that the public "backlash" against managed care will result in new legislation, regulations, and litigation that will further increase their health care costs if they do not distance themselves from health care decisions. Third, employers have modified not only most employee benefit plans, but labor market practices in general, by giving workers more choice, control, and flexibility. DC-type health benefits have existed as cafeteria plans since the 1980s. A cafeteria plan gives each employee the opportunity to determine the allocation of his or her total compensation (within employer-defined limits) among various employee benefits (primarily retirement or health). Most types of DC health benefits currently being discussed could be provided within the existing employment-based health insurance system, with or without the use of cafeteria plans. They could also allow employees to purchase health insurance directly from insurers, or they could drive new technologies and new forms of risk pooling through which health care services are provided and financed. DC health benefits differ from DC retirement plans. Under a DC health plan, employees may face different premiums based on their personal health risk and perhaps other factors such as age and geographic location. Their ability to afford health insurance may depend on how premiums are regulated by the state and how much money their employer provides. In contrast, under a DC retirement plan, employers' contributions are based on the same percentage of income for all employees, but employees are not subject to paying different prices for the same investment.     

Convergence of long-term care planning and retirement planning at the work place

There is an increasing expectation that the private-sector should provide needed solutions to pressing problems in long-term care. Long-term care insurance has figured prominently in recent discussions. Within the long-term care insurance market, the potential of the employer in making such insurance available to employees has been discussed extensively. This paper traces the increasing convergence of retirement planning and long-term care planning at the work place. The long-term care insurance market has come a long way, and the employer-sponsored segment of the market has recorded the highest rate of growth in recent times. Furthermore, the employer-sponsored market is beginning to diversify. Low take-up rates still remain a problem. Recent rapid growth of the market coupled with the federal government's involvement as an employer offering long-term care insurance is bound to expand the market further.     

Implications of ERISA for health benefits and the number of self-funded ERISA plans

This Issue Brief provides an overview of the issues relating to the Employee Retirement Income Security Act of 1974 (ERISA) and health benefit plans, the major case law relating to ERISA and health plans, and the implications of the preemption of state regulations for health plan sponsors and participants. It also presents the latest data on the number of health plan participants in self-funded ERISA plans. Finally, it presents a summary of current legislative proposals that would attempt to amend ERISA. Under the framework ERISA established for employee benefit plans, the regulation of employment-based health benefit plans has evolved into a two-tiered system in which both federal and state laws play important roles. The Supreme Court has interpreted ERISA's "savings" and "deemer" clauses to mean that insured plans are subject to regulations directly at the federal level and indirectly at the state level, while self-funded plans are regulated exclusively at the federal level. The ERISA statute and the courts' interpretations of the Act have created a sharp controversy over how employee health benefit plans are provided and administered, with state regulators and consumer advocates on one side of the debate and plan sponsors (e.g., employers and unions) on the other. State regulators and consumer advocates tend to favor more regulation, and in many instances greater regulation at the state level, which they argue would provide more protections for consumers. However, employers and unions (or any plan sponsors) think ERISA preemption is very important to their ability to provide innovative and cost-effective health benefits for their employees, and assert that ERISA's present structure should be preserved. The U.S. General Accounting Office (GAO) found that 44 million individuals (39 percent of those in ERISA plans) were enrolled in self-funded ERISA plans in 1993, up from 39 million (33 percent of those in ERISA plans) in 1989. The Employee Benefit Research Institute (EBRI), using the same methodology as GAO with 1995 data, estimated that 48 million individuals (39 percent of those in ERISA plans) were enrolled in self-funded ERISA plans in 1995. When policymakers look to amend ERISA, they should consider whether the change to ERISA will produce a higher level of quality for consumers than is being provided under the present system and will continue to do so in the future. Policymakers must also decide whether quality of care is better enhanced by health plans' greater exposure to liability or by market forces. If policymakers decide that increased exposure to liability is the route to go, will consumers be able to enjoy any potential improvement in quality or will more individuals end up uninsured because of increased costs and not be able to get any care regardless of the quality?     

State and local retirement plans: innovation and renovation

This Special Report/Issue Brief examines the universe of state and local retirement plans. It describes how these plans have developed and continue to evolve in a number of areas, including plan features, regulatory framework, governance, and asset management. While these retirement programs differ in many respects from private-sector plans, the disparity in some areas has narrowed. This report also includes a discussion of trends and the underlying forces for change. Public-sector retirement programs provide an important source of pension coverage in the United States, and are a significant part of the total retirement market: Combined public-sector retirement assets (state, local, and federal governments) comprised 29 percent of the $11.2 trillion U.S. retirement market in 1998. State and local plans are dominant in the public-sector retirement market, holding $2.7 trillion in assets, compared with $696 billion held by federal plans (both military and civilian). More than 16 million individuals are employed by state and local jurisdictions in the United States. State and local retirement plans share certain common features because of the environment in which they operate. Legal statutes, governance, and tradition all play a role in defining what is sometimes referred to as a "public-sector culture." Despite common features, there is considerable diversity among public-sector retirement plans. To attract and retain a skilled work force, public-sector employers have increased their use of defined contribution (DC) plans to supplement defined benefit (DB) plans (or, to a lesser extent, replace or serve as an alternative to them) and improve cost-of-living adjustments. At the same time, a combined federal-state regulatory framework has encouraged certain plan design features, unavailable in the private sector, which include multiple tiers for successive generations of employees in a single plan and different strategies to increase portability. State and local retirement plans reflect an increasing role by the federal government in pension system design and operation, which has led to greater complexity in such areas as Social Security participation and deferred compensation arrangements. Complexity can be expected to increase with the recent passage of P.L. 107-16, the Economic Growth and Tax Relief Reconciliation Act of 2001. The latest full-year data included in this report are for 1999 and in some cases 2000. After this report went to press, the Federal Reserve issued significantly revised quarterly data for state, local, and federal retirement plan assets, which were not incorporated in this Issue Brief.     

Health insurance portability: COBRA expansions and job mobility

This Issue Brief discusses continuation-of-coverage mandates under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). It provides background information on health insurance portability and job mobility, data on the cost to employers of providing continuation of coverage to former employees, and a summary of empirical research on COBRA's effect on employee benefits and job mobility. COBRA coverage can be considered advantageous for most workers, as it allows continuation of the health insurance policy they had in place at work when they lose or leave a job. Although employees can be required to pay 102 percent of the premium for COBRA coverage, they can usually realize significant savings compared with the cost of purchasing the equivalent insurance policy in the private market. Many employers consider COBRA to be a costly mandate for three reasons. First, premiums collected from COBRA beneficiaries typically do not cover the costs of the health care services rendered. Second, COBRA imposes an additional administrative cost on employers. Third, many employers view the penalties for noncompliance as excessively large. According to a survey conducted by Charles D. Spencer & Associates, of the 10.2 percent of employees and dependents who were eligible for COBRA coverage in 1996, over 28 percent elected it. In addition, average employer claims costs for COBRA beneficiaries amounted to $5,591, compared with $3,332 for active employees in surveyed plans. According to Employee Benefit Research Institute estimates of the Survey of Income and Program Participation (SIPP), the COBRA population is much older than the general insured population. COBRA beneficiaries also have higher personal income than the general insured population, with this difference being almost entirely due to differences in retirement income. Any attempt to expand COBRA coverage, either through subsidies or by allowing workers to choose from plans with lower premiums, would likely result in increased employer health care costs. As a result, employers may consider various alternatives to reduce, shift, or eliminate the impact of this increased cost. One alternative would be to continue requiring active employees to share in the increased costs through higher employee contributions. A second alternative would be to reduce or eliminate health care benefits for active employees and/or future retirees and their families. A third alternative would be to reduce the size of the work force eligible for health insurance benefits. Finally, employers may pass additional costs on to workers or consumers.     

Long-term care and the private insurance market

Increased life expectancy and the aging of the baby boom generation will bring rapid growth in the number of people at risk of needing long-term care (LTC). This Issue Brief provides an overview of the current LTC financing and delivery system in the United States, focusing on private-sector initiatives to meet the United States' LTC needs. It discusses private-sector plan design--particularly employment-based plan design--providing an in-depth look at the dramatic changes taking place in the private-sector LTC market since its inception in the early and mid 1980s. Aside from informal care provided in the community, the current system of financing LTC depends largely on the Medicaid program and individual financing. Issues confronting this system include spiraling costs associated with LTC services that may threaten beneficiaries' access to care. Other issues include the potential depletion of personal assets and a bias toward institutionalization (which may not always provide the most cost-effective or desired type of care available). Many leaders regard private long-term care insurance (LTCI) as a way to increase access to financing and as a potential alternative to Medicaid and out-of-pocket financing. By the end of 1993, a total of 3.4 million private-sector LTCI policies had been sold, up from approximately 815,000 in 1987. While the majority of these plans were sold to individuals or through group associations, employment-based plans accounted for a significant proportion of this growth. Premiums for LTCI vary substantially based on age and plan design. Insurers generally attempt to set premiums such that they will remain level over the insured's lifetime. However, because little LTC claims insurance experience yet exists, the actuarial basis for developing premiums and statutory reserves is limited. Several bills over the last three Congresses have been introduced to address the issue of LTC. However, due to cost implications and lack of consensus regarding the optimum overall structure required to finance and deliver care, broad legislation to expand coverage--particularly public coverage--is not likely in the near term.     

Small employers and health benefits: findings from the 2000 Small Employer Health Benefits Survey

Many small employers (between two and 50 workers) are making decisions about whether to offer health benefits to their workers without being fully aware of the tax advantages that can make this benefit more affordable. Fifty-seven percent of small employers did not know that they can deduct 100 percent of their health insurance premiums. Nearly one-half of small employers are not aware that workers who purchase health insurance on their own generally cannot deduct 100 percent of their health insurance premiums. Small employers are largely unaware of the laws that have been enacted by nearly all states and the federal government with the intent of making health insurance more accessible and more affordable for many small employers. More than 60 percent did not know that insurers may not deny health insurance coverage to small employers even when the health status of their workers is poor. Most employers offer sound business reasons for offering health benefits to workers. Many have found that it helps with employee recruitment and retention, increases productivity, and reduces absenteeism. Nearly 50 percent of the employers offering dependent (family) coverage report that the workers do not take coverage for their dependents because the dependents have coverage from somewhere else. Twenty-seven percent report their employees decline dependent coverage because they cannot afford the premiums. Many small employers that do not offer health benefits are potential purchasers. Twelve percent are either extremely or very likely to start offering health benefits in the next two years, and 17 percent are somewhat likely to start offering health benefits. A number of factors would increase the likelihood that a small business would seriously consider offering a health benefits plan. Two-thirds of small-business owners said they would seriously consider offering health benefits if the government provided assistance with premiums. Almost one-half would consider doing so if insurance costs fell 10 percent. In addition, one-half would be more likely to seriously consider offering a health benefits plan if employees demand it. Many small employers with health benefits have recently switched health plans, and 34 percent report that they did so within the past year. Affordability for the employer and the worker is clearly a critical factor affecting the likelihood of switching health plans. Nearly all employers who have switched health plans within the past five years cite cost as the main reason. One-third of companies offering health benefits think they will change coverage, and 5 percent think they would drop coverage if the cost of health insurance were to increase by 5 percent.     

Factors Impacting Group Long-Term Care Insurance Enrollment Decisions

This paper examines factors that influence whether or not employees choose to enroll in a group long-term care insurance plan. A conceptual family decision-making framework is used to group factors to study the enrollment decision of 509 state employees who were offered a long-term care insurance plan in 2000. Logistic regression results revealed that employee age, perceived risk, perceived affordability, decision-making style (communication with others and use of information), goals of control and choice, goal of financial peace of mind, household income, and potential caregiver availability explained 68.7% of the decision to enroll. Results support the key role of perception, specifically the perceived risk of needing long-term care and the affordability of the insurance plan, in the decision outcome.     

Questions and answers on health insurance benefit issues

This Issue Brief addresses eight topics in the areas of health insurance and health care costs. Using a question and answer format, the discussion draws largely on EBRI research and the EBRI Databook on Employee Benefits, third edition. In 1993, U.S. expenditures on health care were $884.2 billion, and they are projected to reach $2,173.7 billion by 2005, increasing at a projected average annual rate of 7.8 percent. Health care spending accounted for 13.9 percent of Gross Domestic Product (GDP) in 1993 and is projected to reach 17.9 percent of GDP by 2005. Among the factors contributing to the increase in health care costs are the growth in the number of individuals with traditional reimbursement health insurance coverage, the rapid expansion of technology and treatment options, and demographic factors such as the aging of the population. In 1993, employers, both public and private, spent $235.6 billion on group health insurance, accounting for 6.2 percent of total compensation. Group health insurance is the fastest growing component of total compensation, increasing at an average annual rate of 13.7 percent from 1960 to 1993. An increasing number of employees are required to make a cash contribution to their health insurance plan premium. In 1993, 61 percent of full-time employees in medium and large private establishments who participated in an employee only health insurance plan were required to make a contribution to the premium, up from 27 percent in 1979. In 1993, 185.3 million persons under age 65 had health insurance coverage, while 40.9 million people--or about 18.1 percent of the nonelderly population--received neither private health insurance nor publicly financed health coverage. Of those individuals who had health insurance coverage, 60.8 percent, or 137.4 million persons, received their health insurance through an employment-based plan. In 1993, 15.2 percent of the nonelderly population without health insurance coverage were noncitizens. In six states noncitizens represented a higher proportion of the total uninsured population than individuals in the nation as a whole. An increasing number of employers are self-funding their health insurance plans. In 1994, 74 percent of employers with 500 or more employees self-funded their health insurance plans, up from 63 percent in 1993. An estimated 22 million full-time employees in private industry and state and local governments participated in a self-funded employment-based health insurance plan.(ABSTRACT TRUNCATED AT 400 WORDS)     

Issues of quality and consumer rights in the health care market

This Issue Brief describes how the structure of the health care market has changed in the recent years. It outlines the growth in managed care and the changes in the types of managed care plans available. In addition, it discusses the issue of quality in the health care market. It also includes an overview of the legislative topics and issues relating to quality and consumer rights that policymakers are currently considering. Growth in national health expenditures, the medical care price index, and employer health care costs has slowed significantly since 1990. This decreased growth has coincided with substantial increases in managed care plan enrollment. The percentage of employees enrolled in managed care plans increased from 48 percent to 85 percent from 1992 to 1997. Quality is a multidimensional concept. Although individuals may agree on its components, they may disagree on the relative importance of these components. Therefore, disagreement exists not only on how to measure quality but also on how it is defined. Consequently, policy decisions need to be based on an evaluation of a particular law's effect as opposed to its stated goal or intent. This distinction is important because a law that addresses access or consumer rights does not necessarily address the quality of care a consumer receives. Ultimately, whether an individual believes that a law truly addresses quality will depend in a large part on his or her subjective opinion of what quality entails. To date, comparison of the quality of managed care plans with that of fee-for-service plans has not produced results that uniformly differentiate between these two plan types in either a positive or a negative way. In addition, it is important to note that the current debate on the quality of care provided in the health care market is not new to the present managed care era. The regulations and mandates discussed in this report would not guarantee increased quality in the health care market, unless quality is defined as easier access for those with health insurance. However, if quality is defined as the success of the outcomes of health services provided, the effect of these regulations on quality is in need of further research. Yet, the regulations would have some impact on the costs of health benefits and insurance. This impact has been estimated to be relatively small to substantial, depending on the interpretation of the mandates and assumptions derived from that interpretation. Regardless of the magnitude of the estimated increases, some research has shown that these regulations could have serious implications for the likelihood of small businesses offering health benefits. While these health plan regulations effect on quality depends on one's definition of quality, costs would increase regardless of the definition one uses. Consequently, these regulations would come at a price. Thus, legislators must decide between: (a) imposing regulation that would increase access and consumer "rights" for those with insurance but would be of questionable value to the quality of outcomes, and (b) allowing existing market forces to improve quality through experimentation and competitive forces.     

Small employers and health benefits: findings from the 2002 small employer health benefits survey

Overall, 19 percent of small employers offering health benefits made changes to their health plan between 2001 and 2002. Sixty-five percent increased deductibles and co-pays; 35 percent switched insurers; 30 percent increased the employee share of the premium; and 29 percent cut back on the scope of benefits. Twenty-six percent increased the scope of benefits offered. Nearly one-quarter of small employers offering health benefits think their firm would change coverage and 3 percent think it would drop coverage if the cost were to increase an additional 5 percent. Most small employers offer sound business reasons for offering health benefits to workers. Many report that it helps with employee recruitment and retention, and increases productivity. More than three-quarters report that offering health benefits is "the right thing to do." Most small employers that do offer health benefits report that it has a positive impact on various aspects of the business, such as recruitment, retention, employee attitude and performance, employee health status, and the overall success of the business. Most small employers that do not offer health benefits tend to think that not offering them has no negative impact on the above aspects of their business or the overall success of the business. However, those not offering benefits are more likely than those offering them to report that most of their employees are high-turnover and stay on the job only a few months. Small employers that offer health benefits tend to be distinctly different from those not offering them. Worker income in firms not offering health benefits tends to be considerably lower than in firms that do offer them. Employers not offering health benefits are more likely than those offering them to have a smaller proportion of full-time employees, and employers that do not offer health benefits have a larger proportion of females, workers under age 30, and minority employees. Of small employers that offer dependent coverage, more than 40 percent report that workers do not take coverage for their dependents because the dependents have coverage from somewhere else, but 35 percent report that employees decline dependent coverage because they cannot afford the premiums. Many small employers that do not offer health benefits are potential purchasers. Eleven percent are either extremely or very likely to start offering health benefits in the next two years, and 22 percent are somewhat likely to start offering health benefits.     

Contribution behavior of 401(k) plan participants

This Issue Brief examines the 1999 contribution behavior of 1.7 million 401(k) plan participants drawn from the EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. The findings in this paper build on previous academic research examining the contribution activity of 401(k) participants, by using a large sample of participants in a wide range of plan sizes and by examining in detail the factors that influence contribution activity. Eighty-five percent of participants in the sample only made before-tax contributions to their plans, and 97 percent of all dollars contributed by employees were contributed on a before-tax basis. On average, participants contributed 6.8 percent of their salaries on a before-tax basis. Before-tax contribution activity varied among participants. About 61 percent of participants contributed more than 5 percent of their salaries on a before-tax basis and about 21 percent set aside more than 10 percent of their salaries on a before-tax basis. Eleven percent of participants analyzed in this study earning more than $40,000 a year contributed at the $10,000 before-tax IRC limit in 1999. Thirteen percent of participants with salaries between $70,000 and $80,000 contributed at the cap, and 18 percent of those with salaries between $80,000 and $90,000 were at the limit. However, it appears that among participants not contributing at the IRC limit, 52 percent could not have done so because of formal plan-imposed contribution limits below the IRC limit. Older participants tended to contribute a higher percentage of their salaries to plans than did younger participants, even after factoring out differences in salary and job tenure. Participants tended to increase the share of their salary (and amounts) contributed to their 401(k) plan as their salaries rose until salaries reached $80,000. For individuals with salaries above $80,000, before-tax contribution rates (though not the amounts contributed) tended to fall as salaries rose because IRC, and possibly plan sponsor, contribution limits became binding for some participants. Giving employees the option of borrowing from their 401(k) accounts increased participant contribution rates. On average, a participant in a plan offering loans appeared to contribute 0.6 percentage point more of his or her salary to the plan than a participant in a plan with no loan provision. Total contributions--the sum of employee and employer contributions--were higher for participants who received an employer contribution as part of their 401(k) plan than for those who did not. The average total contribution rate was 10 percent of salary for employees in plans offering an employer contribution, compared with 7.4 percent for those in plans not offering an employer contribution.     

Depression screening,education, and treatment at the workplace: A pilot study utilizing the CDC Health Scorecard

Depression is a significant health issue for many Americans, ranking among the top worksite issues resulting in referrals to Employee Assistance Programs (EAPs) with prevalence rates in the working population of more than 6%. This study was part of a larger statewide assessment conducted using the Centers for Disease Control and Prevention (CDC) Worksite Health Scorecard. The purpose of this study is to examine the number of Kentucky workplaces currently offering screening, education, and treatment related to depression. The study also aims to compare the number of Kentucky workplaces offering these elements by size and industry type. The one-time, cross-sectional assessment surveyed a random sample of 1,200 worksites to examine worksite offerings of screening, education, counseling, management training, and health insurance coverage related to depression. Results showed that the majority of worksites do not provide employee depression screening, education and counseling, management training on identifying warning signs of depression, or comprehensive treatment and follow-up for employees with depression. Smaller worksites (<250 employees) were even less likely than larger companies to provide screening, education, counseling, training, and insurance coverage for depression. Increasing the provision of these wellness components at the worksite has potential to improve the quality of life for employees and reduce the financial burden to employers.     

Enter at your own risk: HMO participation and enrollment in the Medicare risk market

We examine HMO participation and enrollment in the Medicare risk market for the years 1990 to 1995. We develop a profit-maximization model of HMO behavior, which explicitly considers potential linkages between an HMO's production decision in the commercial enrollee market and its participation and production decisions in the Medicare risk market. Our results suggest that the payment rate is a primary determinant of HMO participation, while the price of a supplemental Medicare insurance policy positively affects HMO Medicare enrollment. We also find empirical support for the existence of complementarities in the joint production of an HMO's commercial and Medicare products.     

Sources of health insurance and characteristics of the uninsured: analysis of the March 1997 Current Population Survey

This Issue Brief provides summary data on the insured and uninsured populations in the nation and in each state. It discusses the characteristics most closely related to individuals' health insurance status. Based on EBRI analysis of the March 1997 Current Population Survey, it represents 1996 data--the most recent data available. In 1996, 82.3 percent of nonelderly (under age 65) Americans had private or public health insurance. Seventy-one percent had private insurance, 64 percent through an employment-based plan. Sixteen percent had public health insurance. The percentage of uninsured Americans has been increasing since at least 1987. In 1987, 14.8 percent of the nonelderly population was uninsured, compared with 17.7 percent in 1996. However, the erosion of employment-based health benefits cannot fully explain this increase since 1993. Instead, the decline in public sources of health insurance would partly explain it. It may be that, while the percentage of individuals with employment-based coverage is rising, individuals previously covered by Medicaid and CHAMPUS/CHAMPVA are not being fully absorbed into the employment-based health insurance market. Between 1995 and 1996, the percentage of nonelderly Americans without health insurance coverage increased from 17.4 percent to 17.7 percent. Further examination indicates that children completely accounted for this increase. In 1995, 13.8 percent of children and 19 percent of persons ages 18-64 were uninsured, compared with 14.8 percent of children and 18.9 percent of persons ages 18-64 in 1996. With the recent passage of legislation designed to reduce the number of uninsured children, the next focal point for health care reform could be early retirees and unemployed persons. President Clinton and some members of Congress have expressed an interest in improving access to and affordability of coverage for these groups. Currently, health care cost inflation is at its lowest point in years, but there are signals indicating that it is about to rise above current levels. The federal government's recent announcement that health insurance premiums will rise for federal employees an average of 8.5 percent in 1998 may portend higher future health care costs. Similarly, disappointing earnings announcements from several large insurers because of higher medical costs and lower-than-expected revenues may indicate that health insurance plans will increase premiums. Employment and income play a dominant role in determining an individual's likelihood of having health insurance. Age, gender, firm size, work hours, and industry are also important determinants; however, these variables are also closely linked to employment status and income. Some of the widest variations involve factors that are not always looked at in traditional demographic assessments, such as citizenship. However, variations by race, ethnicity, and citizenship are also closely linked to employment status and income.     

The future of financing for long-term care: the Own Your Future campaign

The purpose of this study was to examine the outreach effort and impact of a joint federal-state campaign, Own Your Future, promoting awareness and planning for long-term care (LTC) in the state of Washington. The study applied survey methodology to evaluate the extent of campaign dissemination, evidence of its impact on LTC planning behaviors, and barriers to purchasing private LTC insurance. A total of 3,198 survey responses from a randomly selected community sample and a Washington State employee sample (ages 51 to 71) were analyzed. Results indicated that the impact of the campaign was limited, both with respect to awareness of the campaign itself and to initiation of LTC planning behaviors. Quantitative data revealed a high prevalence of health-related problems (e.g., obesity, diabetes), inadequate knowledge of basic LTC-related information (e.g., cost, payers), and negative attitudes toward purchasing LTC insurance among respondents. Qualitative analyses suggested that respondents perceived significant problems related to affordability and accountability within the current LTC insurance industry. These possible barriers to the purchase of LTC insurance suggest targets to be addressed by policy makers seeking to find ways to offset the public costs of LTC.     

The Future of Financing for Long-Term Care: The Own Your Future Campaign

The purpose of this study was to examine the outreach effort and impact of a joint federal-state campaign, Own Your Future, promoting awareness and planning for long-term care (LTC) in the state of Washington. The study applied survey methodology to evaluate the extent of campaign dissemination, evidence of its impact on LTC planning behaviors, and barriers to purchasing private LTC insurance. A total of 3,198 survey responses from a randomly selected community sample and a Washington State employee sample (ages 51 to 71) were analyzed. Results indicated that the impact of the campaign was limited, both with respect to awareness of the campaign itself and to initiation of LTC planning behaviors. Quantitative data revealed a high prevalence of health-related problems (e.g., obesity, diabetes), inadequate knowledge of basic LTC-related information (e.g., cost, payers), and negative attitudes toward purchasing LTC insurance among respondents. Qualitative analyses suggested that respondents perceived significant problems related to affordability and accountability within the current LTC insurance industry. These possible barriers to the purchase of LTC insurance suggest targets to be addressed by policy makers seeking to find ways to offset the public costs of LTC.     

Demographic and employment shifts: implications for benefits and economic security

This Issue Brief examines factors affecting the population's age distribution and composition, such as mortality rates, fertility rates, and immigration. In addition, it examines factors affecting labor force composition, such as immigration, increased labor force participation of women, and retirement trends, and discusses the potential impact of these changes on publicly financed programs: Medicare, Medicaid, Social Security, and federal employee retirement systems. The discussion also highlights the implications of these population and labor force changes on employers, employees, and retirees. The elderly population--now 31.8 million, representing 12.6 percent of the population--is projected to experience tremendous growth between 2010 and 2030, when the baby boom generation reaches age 65, rising from 39.7 million, or 13.3 percent of the population, to 69.8 million, or 20.2 percent of the population. Growth in the elderly population has implications for retirement and health care systems. Population projections suggest that the traditionally pyramid-shaped work force, with a proportionately greater number of younger workers than older workers, will be replaced with a more even age distribution. Consequently, significant and continued modifications to benefit packages, such as changes in compensation structures in which earnings automatically rise with age, are likely to occur. Women's labor force participation began to accelerate in the mid-1950s, rising 75 percent among women aged 25-44 in 1991, although there is some indication that this growth may be flattening. With women comprising a greater part of the labor force, employers will be encouraged to develop and implement programs to better accommodate their needs. Increased life expectancy, a decreased percentage of entry level workers, changes in Social Security's normal retirement age from 65 to 67, and employer plans to raise the normal age of retirement or provide incentives to delay retirement, could raise the average age of retirement. However, other factors, such as poor health, other sources of retirement income, and individual preferences for retirement, could still dominate the retirement decision. The combination of increased average life expectancy guaranteeing more years of retirement to finance and rising dependency ratios increases the future cost of Social Security financing. Medicare financing is also an important policy issue because the program is projected to experience financial difficulties in the short term, resulting from explosive health care costs. In addition, Medicaid expenditures are consuming increasing amount of shrinking state budget resources--a large portion of which is used to finance nursing home care for a growing elderly population.