Custom «Non-Rational Escalation of Commitment» Essay Paper Sample

Non-Rational Escalation of Commitment

Employee health benefits are usually provided by large and mid-sized employers and may not be realistic for small scale employees. Health benefits and premiums usually add extra costs to the employers (Bovbjerg, 2007). Naturally, firms must find appropriate methods of reducing the expenses incurred through provision of health benefits and premiums. Unfortunately some firms use unethical means to reduce these expenses. These benefits enable workers seek health care any time they are sick thereby increasing their productivity and that of the company in general (Bovbjerg, 2007).

Some employers take advantage of the employee's sensitivity to price changes in order to discourage them from taking health coverage. When the price of premiums is high employees are less likely to purchase coverage. Some firms also provide several plans and encourage employees to take the less expensive ones. In additional to this, the employer provides a limited number of plans in order to avoid employees picking those which will result to greater expenses for the firm (Rosenfield, 2002). In cases where a wide variety of plans are available the employee may opt to take coverage in his/her spouses firm. In other cases the employee may choose to drop the health coverage in order to avoid high cost. Whichever option the employee takes, the employer ends up reducing costs on health benefits and premiums.

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Naturally the cost of health care keeps on escalating which prompts the employer share the burden of the increasing cost with his employees. Employers indeed find it hard to manage costs while providing these kinds of benefits to the employees sometimes in situations where the company is not performing (Romer & Duggan, 2010). The proportion that employees have to contribute towards the total premium is determined by the firms' size, age distribution, wage distribution, flexible spending account offer, union status and premium level. The firm can alter one or more of these factors in order to burden the employee with excessive costs. Firms which use un-ethical tactics usually do not disclose the criteria used to arrive at the cost to be contributed by the employee. The decision to increase premium is usually carried out by the finance department and the human resource manager.

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Health insurance premiums are usually the second largest expense for firms after the employees' salaries. Theoretically, if firms want to maintain their health coverage, they will have to bear with the high cost of premiums resulting to lower wages.

The law does not require employers to provide health insurance to employees. However it does regulate the provision of premiums and benefits by firms (Romer & Duggan, 2010). Employers are not allowed to discriminate employees when it comes to health benefits and plans. Although the law does not compel firms to offer employees health benefits, it regulates how these benefits are rolled out by firms (Bovbjerg, 2007). Employers are supposed to disclose the full terms of the plans provided. They are also not expected to discriminate individual such on the basis of gender, age and disability.

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The reason for providing employees with plans and benefits is usually to help them manage their health while they continue to work for the company. Escalating premiums irrationally limits the likelihood that employees will get acquire health cover. Ideally the firm and the employee should share premiums on a 50%-each basis however the some companies place these premiums at 75%: 25% with employees meeting the higher percentage. If employees do not take health cover, their health status may be affected because they may skip treatment and lower their productivity and that of the company in general (Bovbjerg, 2007). Companies who find it difficult to manage health insurance have used other techniques to promote the health of the individuals such as through health education. These techniques are much better and morally acceptable as opposed to non-rational increase of commitment.

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