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Rising Healthcare Costs Hurting Industries with Most Employer-Sponsored Insurance

Janice Simmons, for HealthLeaders Media, August 31, 2009

Rapidly rising healthcare costs, which are taking up greater portions of the gross domestic product (GDP), are having an adverse effect on many major industries—especially those that have higher percentages of workers with employer-sponsored insurance, according to a new study from Rand.

For example, between 1987 to 2005, when healthcare costs rose rapidly from 10.8% to 15.2% of the GDP, the workforces in industries with larger percentages of workers with employer-sponsored insurance grew more slowly, said Neeraj Sood, a RAND senior economist, and one of the study authors, in a presentation on Capitol Hill. The study looked at 38 different industries.

For instance, in the utilities industry, in which about 84% of workers have employer-sponsored insurance, the workforce shrank by 2.8%. On the other hand, the workforce in the construction industry, with only about 43% of workers having employer-sponsored insurance, was up about 2.1% annually; and in the hotel industry, in which 54% of workers have health insurance, the workforce grew 1%.

Sood and his colleagues compared American industries with their Canadian counterparts to rule out possibilities that the economic effects were the result of industry wide factors—rather than the effect of employer-sponsored insurance and rising healthcare costs.

Since Canada has universal healthcare that is publicly financed, growth trends in its industries cannot be influenced by employer-sponsored insurance, Sood said. What they found was that "in Canada there is no relationship," which suggests that excess growth in healthcare costs can have adverse economic effects. These effects are more evident in industries with a higher percentage of workers with employer-sponsored insurance, said Sood.

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