The Business Case for Employer-Provided Health Benefits

Publication Date: September 2000

Publisher: California HealthCare Foundation

Author(s): Thomas C. Buchmueller

Research Area:

Type: Report


Evidence on the connection between employer-sponsored health insurance and a company's bottom line could be important in influencing more firms to offer health insurance and in better understanding why some firms offer health insurance and others do not. Because health insurance is a voluntarily provided benefit, employer-provided coverage will only be maintained, let alone expanded, if employers believe there is a "business case" for offering health benefits--that is, if they believe that purchasing insurance on behalf of employees has a positive effect on the company's financial standing. Therefore, in deciding whether it is desirable to build on the current system of employer provision (and if so, how), policy advocates must understand the economic arguments for and against employer provision. This report identifies several possible arguments upon which the business case for offering health insurance might be made, discusses the economic logic pertaining to each, and summarizes the relevant empirical evidence. The intention is to determine whether the various arguments are relevant to the types of firms that are least likely to offer health benefits--small firms employing low-skilled workers. The report is based on a review of academic literature regarding the impact of employer-sponsored health insurance on total compensation, employee turnover, workers' compensation costs, employee absenteeism, health, and morale.