Industries Hurt Most by Soaring Health Costs - Rick Newman (usnews.com)

Industries Hurt Most by Soaring Health Costs - Rick Newman (usnews.com)

August 04, 2009 03:50 PM ET | Rick Newman | Permanent Link | Print

It started as a dull throb in the economy, with the pain growing sharper. Now there's finally a diagnosis: Runaway healthcare costs are directly harming businesses and their employees.

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A new study, however, shows that some industries have become chronically hamstrung by rising healthcare costs, with lower growth and employment than they'd have if costs were lower—or somebody else paid them. Researchers Neeraj Sood, Arkadipta Ghosh, and José J. Escarce of the Rand Corp. analyzed the performance of 38 industries from 1987 to 2005 and found that sectors where a high proportion of workers have company-provided health insurance—such as manufacturing, utilities, communications, education, and finance—showed the lowest growth over the 19-year period. Industries where fewer workers get company-paid health insurance—such as agriculture, hotels, entertainment, retail, and construction—grew more.

... They also compared U.S. industries with their counterparts in Canada—where the government, not business, pays for healthcare—to see if the entire industry was suppressed because of global trends or just the American slice. Their conclusion: Rising healthcare costs in the United States have directly curtailed growth and employment. And the industries with the most generous benefits tend to be penalized for it. "Industries which provide healthcare to a large fraction of workers didn't grow as fast as industries offering health insurance to a small fraction of workers," says Sood.

[See 8 industries that will sit out an economic recovery.]

... Only 59 percent of small firms offer health insurance to their employees, down from 68 percent in 2000. Many business owners say they limit hiring or try to get by with part-timers because the costs of full-time benefits are too high. ...

One startling outcome of the Rand projections is that every one of the 15 industries they analyzed stands to suffer lost jobs and output if healthcare expenses keep rising. Agriculture and forestry, where just 19 percent of workers have company-paid insurance, would shrink the least. Utilities, which cover 83 percent of their workers, would shrink the most. Here's how 15 major industries would fare if healthcare costs swell to 20 percent of GDP by 2017: ...