Controlling Medicare expenditures has been the subject of a great deal of attention and research and a variety of reforms have been implemented or proposed to contain Medicare costs. Very little attention has been directed to the analysis of employer-provided insurance plans. Yet a large proportion of Americans are covered by employer plans and a large fraction of health care costs are paid by employer insurance. Indeed, the limited attention to employer plans is even more striking in light of the emphasis that current reform proposals place on the private sector. The provisions of employer plans and the associated health care cost vary widely across firms. The opportunity to analyze the effect of plan provisions on health expenditures, presented by the enormous variation in provisions and cost, has gone largely untapped. We propose to take advantage of employer experience through the use of a unique data set on employer health insurance claims, maintained by MedStat. The goal is to understand the determinants of employer-provided health insurance costs. The focus is on why medical costs vary so much among firms. To this end, there are several specific aims: (1) To describe the variation across firms and among plans in the same firm with respect to: total health care costs, the cost to the firm and to the employee, the incidence of treatment, the intensity of treatment given that treatment is sought, the allocation of expenditures by condition, and other attributes of health care. (2) To determine the relationship between firm workforce characteristics and health care costs. (3) To determine how health plan provisions influence the incidence of treatment and the intensity of treatment, including the incidence and treatment intensity of specific types of common health problems. (4) To understand the determinants of employee choice among alternative health plans offered by a given firm. (5) To simulate the effect of potential changes in health insurance provisions such as increases in employee premiums, restrictions on coverage in response to caps on the tax-deductibility of health care costs, or an increase in the age of Medicare eligibility. The analysis will be based on individual claims data from a sample of large firms with different health plan provisions and widely varying health insurance costs. Our hope is that an understanding of the determinants of the large differences in health insurance cost among firms will help to understand the likely effect of alternative proposals for containing health costs.
