Health Benefits

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E M P L O Y E E   B E N E F I T S ,   C O M P E N S A T I O N
                  A N D   P E N S I O N   L A W
                 Vol. 2, No. 14: August 9, 2001
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                      Topic of This Issue:
                        Health Benefits
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T A B L E of C O N T E N T S
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NEW and FORTHCOMING ARTICLES

"Employment-Based Health Benefits: Trends and Outlook"
      EBRI Issue Brief, No. 233, May 2001
     PAUL FRONSTIN
        Employee Benefit Research Institute (EBRI)

"Counting the Uninsured: A Comparison of National Surveys"
      EBRI Issue Brief, No. 225, September 2000
     PAUL FRONSTIN
        Employee Benefit Research Institute (EBRI)

"Managed Care Liability for Breach of Fiduciary Duty after Pegram
v. Herdrich: The End of ERISA Preemption for State Law Liability
for Medical Care Decision Making?"
      Florida Law Review, Vol. 53, No. 1, 2000
     THOMAS R. MCLEAN
        University of Missouri at Kansas City
     EDWARD P. RICHARDS
        University of Missouri at Kansas City

"Pegram and Preemption: Patients' Rights and the Case for Doing
Nothing"
      Tax Notes, August 21, 2000
     EDWARD A. ZELINSKY
        Yeshiva University
        Benjamin Cardozo School of Law

WORKING PAPERS

"Health Benefits and Wages: Minimizing the Total Cost of
Compensation"
     NOLAN H. MILLER
        Harvard University
        John F. Kennedy School of Government

"The Self-Employed are Less Likely to Have Health Insurance Than
Wage Earners. So What?"
     CRAIG WILLIAM PERRY
        Princeton University
        Investment Group
     HARVEY S. ROSEN
        Princeton University
        Department of Economics
        National Bureau of Economic Research (NBER)

"Union Effects on Health Insurance Provision and Coverage in the
United States"
     THOMAS C. BUCHMUELLER
        University of California at Irvine
     JOHN E. DINARDO
        University of California at Irvine
        Department of Economics
        University of California at Berkeley
        Department of Economics
        National Bureau of Economic Research (NBER)
     ROBERT G. VALLETTA
        Federal Reserve Bank of San Francisco

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EDITORIAL POLICIES
To provide the broadest coverage of research in Employee
Benefits, Compensation and Pension Law we do not referee working
papers. We accept abstracts of working papers in Employee
Benefits, Compensation and Pension Law whose topics suit the
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scholarly discourse.

N E W and F O R T H C O M I N G Articles
_________________________________________________________________

"Employment-Based Health Benefits: Trends and Outlook"
EBRI Issue Brief, No. 233, May 2001

BY: PAUL FRONSTIN
Employee Benefit Research Institute (EBRI)

Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=270219

Contact: PAUL FRONSTIN
   Email: Mailto:fronstin@ebri.org
Postal: Employee Benefit Research Institute (EBRI)
           Suite 600
           2121 K Street, NW
           Washington, DC 20037-1896 USA
   Phone: 202-775-6352
     Fax: 202-775-6312

Paper Requests:
Contact Alicia Willis at Mailto:willis@ebri.org, or 2121 K St.,
NW, Suite 600, Washington, DC 20037-1896. Phone:(202)775-9132,
Fax:(202)775-6312. Full-Text downloads are available from SSRN
Online for $7.50.

ABSTRACT:
This Issue Brief discusses recent trends in and the future of
employment-based health insurance benefits. The paper explores
recent trends in the percentage of the population with and
without health benefits, the make-up of the benefits package,
and retiree health benefits. The paper finds that despite rising
health insurance costs, employers increasingly have been
offering health benefits to workers, and the percentage covered
by employment-based health benefits has been increasing. Also,
while health insurance cost inflation has been increasing, the
proportion of the premium paid by employees has not been
increasing, and the benefits package has been improving. Retiree
health benefits, however, have seen changes in which retirees
are asked to pay a greater share of the cost of coverage. The
paper also examines the drivers of these trends, such as health
benefit cost increases and labor market conditions and discusses
the outlook for health benefits, in light of the slowing
economy, the enduring problem of uninsurance, impending public
policy changes, and the emergence of defined contribution health
benefits.

The document has 2 tables and 23 charts.

Keywords: Employment-based benefits, Health care costs, Health
care policy, Health insurance coverage, Retiree health benefits,
Uninsured

JEL Classification: J32
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"Counting the Uninsured: A Comparison of National Surveys"
EBRI Issue Brief, No. 225, September 2000

BY: PAUL FRONSTIN
Employee Benefit Research Institute (EBRI)

Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=258302

ABSTRACT:
This paper reviews surveys that provide estimates of the
uninsured population in the United States. Currently, seven
surveys can be used to make nationally representative estimates
of the number of people without health insurance coverage. Some
of the surveys collect health insurance information in the
context of obtaining general information on health care, while
other surveys are focused on other topics such as labor force
participation and public assistance program participation. This
paper includes a discussion of why the estimates from the
various surveys differ.

The most widely used survey that collects information on
health insurance coverage is the Current Population Survey
(CPS), conducted by the Census Bureau. The most recent estimates
from the CPS suggest that 44.3 million Americans were uninsured
in 1998. Besides the CPS, a number of other surveys collect
information on the uninsured population. They include the Survey
of Income and Program Participation (SIPP), Behavioral Risk
Factor Surveillance System (BRFSS), Community Tracking Study
(CTS), Medical Expenditure Panel Survey (MEPS), National Health
Interview Survey (NHIS), and the National Survey of America's
Families (NSAF). Estimates of the uninsured from these surveys
range from 19 million to 44 million and vary depending on the
time frame the survey covers.

It is important to understand the differences in the estimates
of the uninsured population from the various surveys. The
projected cost of implementing policy proposals depends on the
estimates of the number of people affected by the proposals; for
instance, the allocation of funding for the State Children's
Health Insurance Program (S-CHIP) depends heavily on the
available estimates. In addition, the estimated effectiveness of
policy proposals to reduce the uninsured population will be
accurate only if the correct count is known and the precise
make-up of the uninsured population is understood.

A number of states have started to question the validity of
the uninsured estimates from the CPS, and other surveys, because
of the small sample size in many states. As a result, some
states have begun to conduct their own surveys to determine the
number of uninsured residents. States that regularly conduct
their own surveys include Florida, Massachusetts, Minnesota, New
Mexico, Oregon, Vermont, and Wisconsin. Unfortunately, the
various state surveys are not easily comparable.

Research needs to continue to increase understanding of the
differences among the surveys and to improve on methodologies to
count the uninsured, as the future of public programs, such as
S-CHIP and other state and local initiatives to expand health
insurance coverage, depends on the accuracy of these estimates.
Whatever survey is used, the results show that a substantial
number of Americans do not have any health insurance coverage,
and the number has been growing.

Keywords: Health insurance coverage, Uninsured

JEL Classification: I11, J1
______________________________

      BY: THOMAS R. MCLEAN
              University of Missouri at Kansas City
           EDWARD P. RICHARDS
              University of Missouri at Kansas City

Contact: EDWARD P. RICHARDS
   Email: Mailto:richardse@umkc.edu
Postal: University of Missouri at Kansas City
           5100 Rockhill Road
           Kansas City, MO 64110-2499 USA
   Phone: (816)235-2370
     Fax: (816)235-5276
Co-Auth: THOMAS R. MCLEAN
   Email: Mailto:tmclean@dnamail.com
Postal: University of Missouri at Kansas City
           School of Medicine
           5100 Rockhill Road
           Kansas City, MO 64110-2499 USA

ABSTRACT:
When the Supreme Court announced its unanimous verdict in Pegram
v. Herdrich, a case concerning the rights of a plaintiff to sue
an HMO in federal court under the Employee Retirement Income
Security Act (ERISA), the media haled it a victory for the
managed care industry. The plaintiff, Cynthia Herdrich, alleged
that the HMO bribed its physicians with a financial incentive
plan that induced them to deny her needed care to save the plan
money. She sued the HMO for breaching its ERISA fiduciary duty.
In finding for the defendant HMO, the Court held that the HMO
was not the ERISA plan and that it's medical treatment decisions
were not governed by ERISA fiduciary duty provisions. HMO stocks
immediately soared because the court's opinion took notice that
while there are risks associated with rationing medical care;
". . . no HMO organization could survive without some incentive
connecting physician reward with treatment rationing" and that
the court was not prepared to adjudicate the wisdom of medical
care rationing.

While Pegram is the first decision by the Supreme Court to
directly consider a plaintiff's claim that the routine business
practices of the HMO industry violate ERISA standards for
fiduciary conduct, we question whether the stock market analysts
are correct that the Supreme Court has immunized HMO business
practices. It is the premise of this article that in doing so,
the court also removed the ERISA preemption bar to state law
claims for medical malpractice and breach of state fiduciary
law. Paradoxically then, although the defendant HMO in Pegram
won, the managed care industry lost.

Keywords: managed care, HMO, ERISA, malpractice, torts,
insurance law, fiduciary duty

JEL Classification: K2, K4, K32
______________________________

"Pegram and Preemption: Patients' Rights and the Case for Doing
Nothing"
Tax Notes, August 21, 2000

      BY: EDWARD A. ZELINSKY
              Yeshiva University
              Benjamin Cardozo School of Law

Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=239301

Paper ID: Cardozo Law School, Public Law Research Paper No. 20

Contact: EDWARD A. ZELINSKY
   Email: Mailto:zelinsky@ymail.yu.edu
Postal: Yeshiva University
           Benjamin Cardozo School of Law
           55 Fifth Ave.
           New York, NY 10003 USA

ABSTRACT:
In this article, Professor Zelinsky discusses the recent
decision of the U.S. Supreme Court in Pegram v. Herdrich. Most
advocates of broader patients' rights view Pegram as a signal
that Congress should pass legislation amending ERISA to
establish patients' rights against health maintenance
organizations. Professor Zelinsky, however, concludes otherwise
and contends that Pegram counsels advocates of patients' rights
that, in terms of federal legislation, they should do nothing.

The principal argument for federal patients' rights
legislation, says Zelinsky, is that the Court has construed
ERISA section 514(a) so as to preempt state law causes of action
against HMOs and other medical care providers hired pursuant to
employers' fringe benefit plans. Pegram suggests that,
notwithstanding its prior case law, the Court is unwilling to
construe ERISA as nullifying state law malpractice actions.
Thus, substantively, the issue posed by the federal legislation
Congress is now considering is whether there should be a single
nationwide standard for patients' rights or whether there should
be a diversity of state remedies.

______________________________

W O R K I N G P A P E R Abstracts
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"Health Benefits and Wages: Minimizing the Total Cost of
Compensation"

      BY: NOLAN H. MILLER
              Harvard University
              John F. Kennedy School of Government

Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=274152

Paper ID: KSG Faculty Working Paper No. 01-023
Date: May 2001

Contact: NOLAN H. MILLER
   Email: Mailto:nolan_miller@ksg.harvard.edu
Postal: Harvard University
           John F. Kennedy School of Government
           79 John F. Kennedy Street
           Cambridge, MA 02138 USA
   Phone: 617-496-8959
     Fax: 617-496-5747

Paper Requests:
Contact Raquel Schott, Mailto:Raquel_Schott@ksg.harvard.edu
Postal: JFK School of Government, Harvard University, 79 John F.
Kennedy St., Cambridge, MA 02138. Phone:(617)495-5444.
Fax:(617)496-0001.

ABSTRACT:
We study the role of health benefits in an employer's
compensation strategy, given the overall goal of minimizing the
total compensation expense (wages plus health-insurance cost)
for a fixed number of workers. The employer's basic benefit
package consists of a base wage and a moderate health plan. It
may also offer the option of upgrading to a generous health plan
for an additional charge. Optimally, the base wage is set in
order to balance the total wage bill against the expected cost
of health care, while in setting the charge for generous
coverage the employer acts as a monopolist who sells generous
health plans to her employees. Seen from this perspective,
extreme adverse selection and "premium death spiral" are not
likely. However, the optimal compensation package may exclude
either low-cost or high-cost employees.

Keywords: Economics - Economic and Econometric Theory,
Economics - Microeconomics, Welfare/Health Care/Social Policy

______________________________

"The Self-Employed are Less Likely to Have Health Insurance Than
Wage Earners. So What?"

      BY: CRAIG WILLIAM PERRY
              Princeton University
              Investment Group
           HARVEY S. ROSEN
              Princeton University
              Department of Economics
              National Bureau of Economic Research (NBER)

Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=271828

Paper ID: NBER Working Paper No. W8316
Date: June 2001

Contact: CRAIG WILLIAM PERRY
   Email: Mailto:cwperry@princeton.edu
Postal: Princeton University
           Investment Group
           22 Chambers Street
           Princeton, NJ 08542 USA
Co-Auth: HARVEY S. ROSEN
   Email: Mailto:hsr@mail.Princeton.EDU
Postal: Princeton University
           Department of Economics
           001 Fisher Hall
           Princeton, NJ 08544 USA

Paper Requests:
Full-Text downloads are available from SSRN Online for $5.

ABSTRACT:
There is considerable public policy concern over the relatively
low rates of health insurance coverage among the self-employed
in the United States. Presumably, the reason for the concern is
that their low rates of insurance lead to worse health outcomes.
We use data from the Medical Expenditure Panel Survey conducted
in 1996 to analyze how the self-employed and wage-earners differ
with respect to insurance coverage and health status. Using a
variety of ways to measure health status, we find that the
relative lack of health insurance among the self-employed does
not affect their health. For virtually every subjective and
objective measure of health status, the self-employed and wage
earners are statistically indistinguishable from each other.
Further, we present some evidence that this phenomenon is not
due to the fact that individuals who select into self-employment
are healthier than wage-earners, ceteris paribus. Thus, the
public policy concern with the relative lack of health insurance
among the self-employed may be somewhat misplaced.

JEL Classification: I1
______________________________

"Union Effects on Health Insurance Provision and Coverage in the
United States"

      BY: THOMAS C. BUCHMUELLER
              University of California at Irvine
           JOHN E. DINARDO
              University of California at Irvine
              Department of Economics
              University of California at Berkeley
              Department of Economics
              National Bureau of Economic Research (NBER)
           ROBERT G. VALLETTA
              Federal Reserve Bank of San Francisco

Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=267422

Paper ID: NBER Working Paper No. W8238
Date: April 2001

Contact: THOMAS C. BUCHMUELLER
   Email: Mailto:tcbuchmu@uci.edu
Postal: University of California at Irvine
           Campus Drive
           Irvine, CA 62697-3125 USA
Co-Auth: JOHN E. DINARDO
   Email: Mailto:jdinardo@uci.edu
Postal: University of California at Irvine
           Department of Economics
           3151 Social Science Plaza
           Irvine, CA 92697-5100 USA
Co-Auth: ROBERT G. VALLETTA
   Email: Mailto:rvalletta@sanf.frb.org
Postal: Federal Reserve Bank of San Francisco
           101 Market Street
           San Francisco, CA 94105 USA

Paper Requests:
Full-Text downloads are available from SSRN Online for $5.

ABSTRACT:
During the past two decades, union density has declined in the
United States and employer provision of health benefits has
undergone substantial changes in extent and form. Using
individual data spanning the years 1983-1997, combined with
establishment data for 1993, we update and extend previous
analyses of private-sector union effects on employer-provided
health benefits. We find that the union effect on health
insurance coverage rates has fallen somewhat but remains large,
due to an increase over time in the union effect on employee
"take-up" of offered insurance, and that declining unionization
explains 20-35 percent of the decline in employee health
coverage. The increasing union take-up effect is linked to union
effects on employees' direct costs for health insurance and the
availability of retiree coverage.