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Are small firms greater health risks?
W W Young1, D Z Joyce, B C Carter
1International Center for Health Services Research, Pittsburgh, PA, USA.
Health Affairs (Project Hope)
|January 1, 1995
Summary
Firm size does not determine health care service use. Small and large firms face higher costs, while risk pooling benefits smaller companies, making community rating feasible.
Area of Science:
- Health Services Research
- Health Economics
- Insurance Studies
Background:
- Understanding the relationship between firm size and healthcare utilization is crucial for insurance policy.
- Previous studies have not fully elucidated how firm size impacts healthcare costs and service use.
Purpose of the Study:
- To investigate if healthcare service utilization is dependent on firm size.
- To analyze the cost-effectiveness of risk-pooling strategies across different firm sizes.
Main Methods:
- Analysis of a three-year (1988-1990) private insurance claims database.
- Inclusion of data from 28,990 firms and approximately 1.4 million subscribers in western Pennsylvania.
- Examination of medically underwritten costs and subscriber costs in various risk-pooling arrangements.
Main Results:
- Both small and large firms exhibited higher medically underwritten costs compared to mid-size firms.
- Risk pools including small companies demonstrated lower per-subscriber costs than those with large companies.
- Age, sex, health status, and inpatient hospital type were key determinants of costs for pooled subscribers.
Conclusions:
- Firm size is not a direct determinant of healthcare service use.
- Risk adjustment using demographic and health status factors can support community rating.
- Community rating presents a viable strategy for enhancing health insurance affordability and accessibility.
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