ISSN 1556-6757


SJI 


 

 

 

 

 

 

 

 

 

 

 

 


 

 
 
 
Volume 1, Issue 1, 2009
 
 
Does Offering Health Insurance to Employees Reduce a Firm’s Competitive Advantage?
Daniel Friesner, Matthew McPherson, Clarence H. Barnes, Mohammed Khayum

Abstract
The decision to offer health insurance to employees and their families is a difficult one for many small and mid-sized businesses. Factors such as the aging U.S. population and rising medical costs have dramatically increased health insurance premiums, the majority of which is paid for by employers. Many firms contend that increasing health insurance costs have significantly reduced their profit margins and their ability to compete against firms that do not offer health insurance as a non-wage benefit. This paper conducts an initial empirical analysis to determine whether firms offering health insurance to their employees are placed at a competitive disadvantage relative to those firms not offering health insurance. Using business outlook survey data from a mid-sized, Midwestern economy, there is little evidence to suggest that providing health insurance, or identifying health insurance as a significant competitive issue,
hurts the financial viability of a firm any more or less than it harms any other firm in the economy. As a result, while the cost of health insurance may be a significant problem for a firm’s bottom line, it does not appear to affect a firm’s ability to compete in its market. Full Article