Implicit pooling of workers from large and small firms

Area of Science:

• Health economics
• Health services research
• Public health policy

Background:

• Small employer health insurance is a key focus of national health care reform.
• States are implementing explicit risk pools for small employers.
• Many small-firm employees access insurance via large-firm dependents (implicit pooling).

Purpose of the Study:

• To quantify implicit health insurance pooling among small-firm employees.
• To determine if small-firm employees represent adverse health risks.
• To evaluate cost implications of merging small and large employer risk pools.

Main Methods:

• Utilized data from the 1987 National Medical Expenditure Survey.
• Analyzed extent of implicit pooling arrangements.
• Assessed health risk profiles and cost impacts.

Main Results:

• Implicit pooling through large-firm dependents is a significant, though undocumented, phenomenon.
• Small-firm employees and their dependents do not appear to be adverse health risks.
• Pooling small and large firms may offer cost efficiencies.

Conclusions:

• Implicit pooling currently provides a safety net for many small-firm employees.
• Integrating small and large employer risk pools is a viable strategy for health reform.
• Policy should consider leveraging existing implicit arrangements for efficiency.