When employers give workers exceptionally generous group health insurance, the extra money usually goes into more discretionary benefits, ranging from dental care to routine physicals, rather than basic hospital care, according to a new study by the National Center for Health Services Research.
The center, a unit of the Department of Health and Human Services, surveyed the coverage provided under job-related health insurance plans to 58.3 million workers and 119.4 million members of their families, a total of 177.7 million people. It found that the extra benefits of more generous plans usually went to dental care, vision and hearing benefits, prescription drugs, outpatient psychiatric visits and physical examinations.
The question of what this money buys is at issue in the debate over federal tax deductions for health insurance benefits.
The Reagan administration has argued that workers care little about the rising cost of medical care when they have virtually all medical expenses covered by health insurance for which they pay little or nothing. They then use more medical care than necessary, according to this argument, which helps inflate costs.
To counter this, the administration has proposed that employer-paid health insurance premiums above $2,100 a year per family be counted as taxable income to the worker. Employer-paid health premiums are not now taxable as income regardless of the amount.
If such a tax cap were imposed, the administration has argued, workers would be less likely to demand more expensive policies covering some relatively marginal health costs. Organized labor and many other groups have challenged the administration assumptions and Congress so far has not approved the change.
The new study found that 34.4 million workers had a total annual health insurance premium of less than $1,000 per family in 1977, much or all of which was employer-paid. Another 14.9 million had a total premium between $1,000 and $1,400 per family, and the remaining 9 million more than $1,400.
The study found that employes in the two higher-premium groups were much more likely than those in the lower group to have coverage for dental, vision, hearing, outpatient, drug and psychiatric care than those in the lower group.
In the two higher groups, 38 percent had dental coverage, compared with 16 percent in the lower group. Fourteen percent in the higher groups had vision or hearing coverage, compared with 7 percent in the lower group.
Nine out of 10 of those in the two higher groups were covered for prescription drugs, compared with 83 percent in the lower groups; 8 percent were covered for routine physicals, compared with 4 percent, and 79 percent were covered for outpatient psychiatric care, compared with 73 percent.
The two higher-premium groups also had fewer deductibles and copayments for hospital care, but not a higher rate of hospital coverage. About 78 percent of the over-$1,400 premium group and 77 percent of the $1,000-to-$1,400 group had coverage for a semiprivate room with no deductible. But only 61 percent in the under-$1,000 premium group had such coverage.
The higher-premium groups also had smaller deductions or copayments for physician care. Nearly 13 percent of the over-$1,400 group and 9.5 percent of the $1,000-to-$1,400 group had no deductible and less than a 20 percent copayment for doctor care. But only 5 percent of the under-$1,000 premium group had this coverage.
But the authors of the study concluded that "what was least affected by differences in employes' health insurance premiums was their protection against very large, clearly catastrophic expenses."
Thirty-eight percent of the lowest premium group, 43 percent of the $1,000-to-$1,400 group and 38 percent of the over-$1,400 group had major medical benefits of $250,000 or more.
The authors of the study, Gail R. Wilensky, Pamela J. Farley and Amy K. Taylor, concluded that the proposed taxing of generous health insurance premium payments, depending on the dollar level at which it takes effect, would not reduce basic hospital protection but would probably reduce coverage of dental services, vision and hearing care, routine physician visits and front-end, out-of-pocket hospital charges.