Health Benefit Satisfaction in the Public and Private Sectors: The Role of Distributive and Procedural Justice

• Author: Ed Ward,Elaine Davis
• Date: 01 September 1995
• Published date: 01 September 1995
• DOI: 10.1177/009102609502400301
• Subject Matter: Article

Health Benefit Satisfaction

in

the

Public and Private

Sectors: The Role

of

Distributive and

Procedural Justice

-

One of the most compelling problems outstanding in the field of employee benefits today is

trying to control spiraling health care expenditures. Furthermore, as a result of the cost

containmentstrategies being used in health plans in the recent years, health benefit satisfaction

has become an important variable for employers to consider. The purpose of this study was

to identify how distributive and procedural justice apply to health benefit satisfaction in two

different working populations. The study was conducted using public and private sector

employees for comparison purposes. MANOVAsand univariate analysis were used to deter-

mine whether any significant differences were revealed between the two employee groups.

Multiple regression was used to evaluate the relative contribution of each factor to benefit

satisfaction. The results of the analyses revealed that public sector employees experienced

significantly greater benefit satisfaction, normative commitment to the organization, distribu-

~ve

justice, and greater quality and convenience of health care. In both groups, distributive

J~stice

(equity perceptions) accounted for the greatest amount of variance in benefit satisfac-

tion, along with affectivecommitment. In addition, procedural justice accounted for 7%of the

variance in private sector benefit satisfaction. Implications for practicing managers are dis-

cussed.

By

Elaine Davis

EdWard

Elaine Davis Is an associate

professor of management in

the Managementand Finance

Departmentof St. Cloud

University. She received her

Ph.D. from the University of

Nebraska-Lincoln. Her

currentresearchinterests

include health care cost

containmentand issues

related 10the ADA and FMLA.

There has

been

agrowing interest in the

study

of employee health

benefits in the last few years, as the financial costs of providing

such

benefits

has

escalated at an alarming pace. In 1992,Americans

paid

14% of the gross

national

product

(GNP), or 14 cents

out

of every dollar of national income

for health care,

and

costs are projected to rise to 20% of the GNP by the

year

2000 (Star, 1993). The concern over health care costs lies

not

only at the

nationallevel,

but

at the organizationallevel, where employers cover almost

two-thirds of Americans with health insurance,

and

shoulder

the greatest

burden

of the health care crisis (Davis, 1991). In addition, arecent report

from the Labor

Department

revealed a 5.5%

annual

increase in

how

much

employers

pay

for workers, with the largest

part

of the increase in payroll

costs

not

going to worker's take-home pay,

but

to health care coverage (U.S.

Bureau of Labor Statistics, 1991).This increase in labor costs is clearly

not

increased expenditures related to performance.

Public Personnel Management Volume 24

No.3

(Fall, 1995) 255

Effort to contain

costs.

Efforts by employers to contain mushrooming health care costs in-

clude expanded employee deductibles

and

co-pays, second surgical opin-

ions, higher employee contributions to premiums, along with aggressive

monitoring of the need for certain medical treatments before paying bene-

fits, often requiring pre authorization before treatment (Luthans &Davis,

1990).

While benefit specialists and insurance companies have been closely

monitoring cost containment efforts over the past several years,

and

have

extensive data bases of usage patterns and statistics detailing the financial

outcomes of the various strategies, research attempting to tap the less

concrete, less tangible,

human

side of cost containment has been virtually

nonexistent. Nevertheless, investigation of a nonfinancial nature is impor-

tant to explore

what

the

human

implications have been as a result of the

changes. Any yet the

human

implications do have a cost, as they often

result in loss of commitment to the organization,

and

reduced job satisfac-

tion, which in

tum

result in costly turnover (Tett &Meyer,

1993).

The application of the social psychology framework for organizational

justice is particularly appropriate

when

viewing cost containment efforts,

via the decision making, change

and

implementation processes involved in

organizations. While a significant number of studies have been conducted

in government

and

legal organizations, there is a fair

amount

of evidence

which suggests that distributive

and

procedural justice theories may be

universal

in

scope

and

do extend to business settings (Folger &Greenberg,

1985;

Kim &Mauborgne,

1993;

Niehoff &Moorman, 1993;Sheppard,

1984;

Sweeney &McFarlin,

1993).

The primary purpose of this study is to

determine the correlates of employee health benefitsatisfaction via analysis

of organizational justice.

Distributive and Procedural Justice

Edward Ward is an associate

professor of management in

the Management and Finance

Departmentof St. Cloud State

University. He received a

Ph.D. in industrial/

organizational psychology

from the Universilyof

Nebraska-Lincoin. His

current

research

interests

include correlates of

preference forcompetitive or

cooperative strategiesand

determinantsof the

psychological climate.

Justice researchers have identified two primary forms of fairness that

are relevant to predicting benefit satisfaction. Procedural justice refers to

how

organizations go about the decision process or the means used to

determine resource allocation (Knovsky,

1992).

"Fair" procedures are usu-

ally those thatallow the employee some control over the information being

considered. Recent work in the area of procedural justice has shown that

perceptions of fair treatment

depend

on the relative level of the employee's

outcomes

and

on the explanation given for those outcomes (Folger &Bies,

1990;

Lind &Tyler,

1988).

Perceptions of inequity

and

the employee's

attempt to change the inequity have been reduced

when

explanations are

256

Public

Personnel

Management

Volume

24 No.3

(Fall,

1995)