STUDY: Higher Health Care Costs May Decrease Worker Productivity

Over the last decade, employers have steadily been shifting the cost of health care coverage onto their employees relative to medical inflation and stagnating wages. This asymmetric cost-sharing is meant to stem the rising tide of health costs paid for by employers by encouraging workers to be more efficient and frugal with their health spending. But a new working paper from the National Bureau of Economic Research suggests that when it comes to medically-needy employees, these health “savings” may actually come at a greater cost.

As Sarah Kliff explains, the study finds that while employers might see immediate savings on their balance sheets by shifting costs onto their workers, the strategy could be a losing one in the aggregate, encouraging sick employees to forego increasingly expensive care and consequently resort to absenteeism:

On average, employees with chronic pain had 76.7 hours absent from work. But with every $5 increase in cost-sharing for pain medications, they saw an increase in absenteeism somewhere in the ballpark of 1.3 to 3.1 percent.

That may seem small, but as the researchers explain, the consequences could be quite large, enough to offset any savings the higher co-payments generate for that employee:


If we assume that a $5 increase in cost-sharing (20%) is associated with a 1 hour increase in absence (~1.3%) this would be valued at $42/hour fully loaded with fringe benefits (workers in private industry, large establishments) (BLS 2012). Alternatively, the average hourly earnings for Americans overall is about $31 loaded.

The $31-$42/hr in absence-related costs would offset any employer savings associated with raising copayments.

This is yet another clear-cut signal for the need for widespread, affordable health coverage. If Obamacare’s cost control measures — such as “medical loss ratios” and federal subsidies to encourage individuals and employers to obtain and offer health insurance — can successfully bend the health care cost curve and make coverage more affordable, companies may see benefits for both their employees’ well-being as well as their own bottom lines.