Center for Studying Health System Change

Providing Insights that Contribute to Better Health Policy


Insurance Coverage & Costs Costs The Uninsured Private Coverage Employer Sponsored Individual Public Coverage Medicare Medicaid and SCHIP Access to Care Quality & Care Delivery Health Care Markets Issue Briefs Data Bulletins Research Briefs Policy Analyses Community Reports Journal Articles Other Publications Surveys Site Visits Design and Methods Data Files

Small Firms' Demand for Health Insurance: The Decision to Offer Insurance

Summer 2002
Inquiry, Vol. 39, No. 2, pp. 118-137 (Summer 2002)
Jack Hadley, James D. Reschovsky

his paper explores the decisions by small business establishments (<100 workers) to offer health insurance. We estimate a theoretically derived model of establishments’ demand for insurance using nationally representative data from the 1997 Robert Wood Johnson Foundation Employer Health Insurance Survey and other sources. Findings show that offer decisions reflect worker demand, labor market conditions, and establishments’ costs of providing coverage. Premiums have a moderate effect on offer decisions (elasticity = -.54), though very small establishments and those employing low-wage workers are more responsive. This suggests that premium subsidies to employers would be an inefficient means of increasing insurance coverage. Greater availability of public insurance and safety net care has a small negative effect on offer decisions.

For a full copy of this article, please visit the Inquiry Web site. (Subscription required.)


Back to Top
Site Last Updated: 9/15/2014             Privacy Policy
The Center for Studying Health System Change Ceased operation on Dec. 31, 2013.