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ISSN 1556-6757 |
SJI |
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| Volume
3, Issue 1, 2009 |
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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
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