Study reveals loss of health care in recession

When gas prices rise, Americans drive less. When food prices increase, Americans cut coupons.

And when medical costs go up, both consumers and employers cut health
insurance.

A recent study found that roughly nine times as many Americans have lost health coverage in the recession of 2007-09 as in the recession in the early 2000s.

The study, titled “The Impact of the Macroeconomy on Health Insurance Coverage: Evidence From the Great Recession,” stated that an estimated 9.3 million Americans lost their coverage because of unemployment rates, which were worse than the recession 10 years ago.

“We were surprised more hadn’t been done on how the macroeconomy affects health insurance,” said Kosali Simon, a faculty member of the School of Public and Environmental Affairs who helped author the study.

Other authors include John Cawley, a professor in the College of Human Ecology at Cornell University, and Asako Moriya of Carnegie Mellon University, who has a Ph.D. in economics and public policy.

The study, which Simon said built on previous literature on how economic turmoil affects people, found, however, that 4.2 million children under 18 gained health insurance. Yet white, older and well-educated men were much more likely than women and children to lose health insurance because of the recession.

Even for men who didn’t lose health coverage, increases in the unemployment rate were associated with loss of health coverage.

Simon said she believes small business firms face a tougher financial burden when it comes to cutting health care costs, although she said she does not have a research-based answer to whether smaller firms lost health insurance due to
the recession.

“I expect, based on the research evidence that exists on small firms, that they would have an especially tough time in the recession,” Simon said.

Additional evidence suggests that smaller firms’ financial burdens are due in part to higher broker fees and health plan administrative costs.

A study done by researchers at the University of Minnesota found that loading fees — the amount of medical care expenditure the insurance companies pay along with administrative fees, profits and other sales-related expenses — are lowest for firms of 10,000 employees.

But Mike Ketron, vice president of insured sales at SIHO Insurance Services, said the belief that smaller businesses pay more than big businesses for health insurance is a misconception and that many years ago, the size of the company might have lowered the cost of health insurance.

“We base the cost on the demographics: sex of the employees, where they’re located and the health risks involved,” Ketron said.

Ketron said most agents are paid on a “pro-head basis” — a certain number of dollars per employee per month.

“The base rate itself is not dictated because of the size of the group,” he said. “There are group-size factors, but it’s not so significant that a small group is extremely higher than a larger group.”

Regardless of the price variations between company sizes, Ketron said that while working at SIHO, he has seen businesses forced to cut employee benefits or consider changes to make the health plan more affordable.

“Employee benefits help attract employees, and if you drop your plan, that puts a big burden on your employees, so what are they going to do?” he said. “They’re forced to look somewhere else at a job that provides benefits.

“You’re also putting your employees at risk and your workforce at risk. It’s the last thing you want to do.”

Some companies, however, maintain employee attraction by implementing cheaper alternatives for health benefits, such as a wellness program.

The Greater Bloomington Chamber of Commerce, an organization in Bloomington that offers resources to local businesses, created the Healthy Business Bloomington Program. In 2010, the chamber’s Healthcare Team offered a program businesses can apply for to improve work site wellness.

Such programs can still be expensive for businesses that are struggling, Ketron said, but Tasus Corporation, an automotive supplier that has 2,400 employees in 32 locations, including Bloomington, found ways to improve employee health by forming a wellness committee.

“I think in the long run, the only way we can control medical costs is to have a healthier workforce,” said Mike Anderson, who lost more than 100 pounds in the past year and is the director of human resources at Tasus. “It starts with individuals and personal accountability, because I don’t see the cost of medical care going down anytime soon.”

Although Anderson said the company is continuing to struggle along with other businesses, he said company officials did not make changes to their employee benefit plans. The company paid minor costs for the healthy business program.

Anderson said what works for one company to save money while improving health might not work for another, but that forming a wellness committee is a good idea.

“At the very basic level, it’s an individual choice for health living, regardless of whether the economy is good or bad,” he said. “It starts with one person.”