Economic Issues in Hawaii Employer-Sponsored Health Insurance: Overview of Methods & Results

1. Economic Issues in Hawaii Employer-Sponsored Health Insurance: Overview of Methods & Results Gerard Russo, Ph.D. Sang-Hyop Lee, Ph.D. Katerina Sherstyuk, Ph.D. University of Hawai`i at Mānoa Hawai`i Coverage for All Project HRSA SPG Technical Workshop VI 17 September 2004 This research is funded in part through a U.S. Health Resources and Services Administration, State Planning Grant to the Hawaii State Department of Health. Sub-Contract Research Corporation of the University of Hawaii. Research conducted by the University of Hawaii, Social Science Research Institute in collaboration with the Hawaii State Department of Health, Hawaii Institute for Public Affairs: Hawaii Uninsured Project and the Hawaii Health Information Corporation.

2. Four Presentations on PHCA and the Labor Markets • PHCA: Econometric Results CPS 1994-2003 • PHCA: Experimental Results • Uncovered Workers: CPS 1994-2003 • ESI Premiums: MEPS-IC 2002

3. Employer-Sponsored Insurance (ESI) • More than 60% of the U.S. population receives employment-based health insurance (CPS 1994-2003). • Why so much ESI? • Favorable tax treatment • Less adverse selection • Predictable risk • Low administrative costs

4. The impact of the Pre-Paid Health Care Act: What did we already know. • Employers voluntarily offer health insurance and employees voluntarily enroll without PHCA. • Most likely the case: • Large Employers • Full-Time Employees • High-Wage Employees • Least likely the case: • Small Employers • Part-Time Employees • Low-Wage Employees • Confirmed by the MEPS-IC

5. Two Methodologies • Econometric Analysis of the Current Population Survey • Model-based micro-simulations of labor market effects. • Non-experimental data: survey • Economic Experiment • Model-based micro-simulations of labor market effects. • Experimental data: laboratory

6. Econometric Results of PHCA:Improvements in Analysis • Data analysis extended to10-years of the Current Population Survey 1994-2003. • Test sensitivity of results to the presence of Military Health Insurance. • Variant with CHAMPUS/TRICARE • Variant without CHAMPUS/TRICARE • Test sensitivity of results to measures of hours worked • Variant with usual hours worked at all jobs held last year. • Variant with usual hours worked at main job held last week. • Test sensitivity of results to selection of factual and counterfactual basis. • U.S. Means • Hawaii Means • Simulate insurance coverage by single hours worked.

7. Experimental Results of PHCA • Version I: Model Based on Competitive Labor Markets with Flexible Wages. • Version II: Model Based on Competitive Labor Markets with Wage Rigidities. • Minimum Wage Regulation • Long-Term Collective Bargaining Contract

8. The Effects of PHCA:What we found. • More coverage overall • More full-time workers with ESI than otherwise would occur. • More part-time workers without ESI than otherwise. • Avoidance of PHCA • Labor market sorting • Firms & Labor Adjust to PHCA • 20-hour rule provides escape clause, safety release • Potential damage to industry and labor is lessened • Minimum wage law will decrease voluntary ESI offerings, particularly for part-time and low-wage workers. • Minimum wage law with mandatory ESI for all, will increase coverage among those with jobs, but may decrease the number of jobs. • Utilize full-time workers more intensely • Hire fewer part-time employees & cause unemployment

9. Continuing Questions • What is the impact of PHCA on wages in the Hawaii labor market? • Are cash wages falling as insurance premiums rise? • Do cash wages fall as benefits increase? • What is the impact of PHCA on labor productivity? • Are workers and jobs being matched properly? • What is the impact of PHCA on the Health Insurance Market? • Are premiums higher or lower as a result of PHCA?

10. Mahalo! This research is funded in part by U.S. Department of Health and Human Services Health Resources & Services Administration State Planning Grant Hawaii State Department of Health.