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
containment strategies 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. MANOVAs and 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
tive justice, and greater quality and convenience of health care In both groups, distributive
justice (equity perceptions) accounted for the greatest amount of variance in benefit satisfac­
tion, along with affective commitment. In addition, procedural justice accounted for 7% of the
variance in private sector benefit satisfaction. Implications for practicing managers are dis­
cussed.

There has been a growing interest in the study of employee health

By
benefits in the last few years, as the financial costs of providing such benefits
Elaine Davis
Ed Ward 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
national level, but at the organizational level, 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, a recent 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
Elaine Davis is an associate increased expenditures related to performance.
professor of management in
the Management and Finance
Department of St. Cloud
University. She received her
Ph.D. from the University of
Nebraska-Lincoln. Her
current research interests
include health care cost
containment and issues
related to the ADA and FMLA.

Public Personnel Management Volume 24 No. 3 (Fall, 1995) 255

Copyright © 2001. All Rights Reserved.

 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 preauthorization 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 turn 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 benefit satisfaction via analysis
of organizational justice.

Distributive and Procedural Justice

Justice researchers have identified two primary forms of fairness that

are relevant to predicting benefit satisfaction. Procedural justice refers to
Edward Ward is an associate
professor of management in how organizations go about the decision process or the means used to
the Management and Finance
Department of St. Q oud State
determine resource allocation (Knovsky, 1992). "Fair" procedures are usu­
University. He received a
Ph.D. in industrial/
ally those that allow the employee some control over the information being
organizational psychology considered. Recent work in the area of procedural justice has shown that
from the University of
Nebraska-Lincoln. His perceptions of fair treatment depend on the relative level of the employee's
current research interests
include correlates of
outcomes and on the explanation given for those outcomes (Folger & Bies,
preference for competitive or
cooperative strategies and
1990; Lind & Tyler, 1988). Perceptions of inequity and the employee's
determinants of the attempt to change the inequity have been reduced when explanations are
psychological climate.

256 Public Personnel Management Volume 24 No. 3 (Fall, 1995)

Copyright © 2001. All Rights Reserved.

given that account for the inequity. Employee acceptance of inequity has
occurred when employees were assured that top management was sensi­
tive to employee viewpoints and top management communicated their
ideas honestly, the decision or procedure was made without bias, applied
consistently, was carefully justified, and affected employees were treated
in a courteous and civil manner (Bies & Moag, 1986; Bies, 1986; Greenberg,
1986; Lind & Lissak, 1985; Sharon & Buttner, 1988; Tyler, 1988; Tyler & Bies,
1990). According to Lind & Tyler (1988), procedural fairness has a very
significant impact on higher-order issues such as commitment to the organi­
zation because fair procedures demonstrate management's respect for the
individual employee.

Procedural fairness enhances the perceived fairness of negative out­

comes, and effects appear to be robust across numerous types of employees
and organizations and using differing operational measures (see previous
cites). This stream of research gives clear indications that interpersonal
treatment is a significant determinant of employee reactions to inequitable
or unfair situations, and has significant consequences for managers, i.e.
employee absenteeism, loss of commitment, turnover.

Distributive justice refers to the perceived fairness of outcomes that

result from decisions made (Folger & Greenberg, 1985). Employees evaluate
their perception of the fairness of management decisions, relative to out­
come distribution (Dailey & Kirk, 1992). Although equity theory is not
restricted to matters of compensation, the manipulation of monetary out­
comes has proven to have the most robust findings within equity theory
(Adams, 1965; 1968). Compensation specialists and practitioners are well
aware of the importance of equity considerations in setting pay scales, with
major efforts made to avoid dissatisfaction with pay. In contrast, little
research has examined equity considerations with regard to employee
benefits, an increasingly expensive form of compensation today. Employee
perception of how resources were allocated and the fairness of the alloca­
tion could be strong determinants of benefit satisfaction. As more employ­
ers ask employees to accept permanent benefit changes and reductions in
coverage, benefit satisfaction may surface as a critical variable for employ­
ers.

Justice research has found that procedural and distributive justice

have different effects or consequences. Folger & Konovsky (1989) found
that distributive justice predicted pay satisfaction, while procedural justice
predicted employee commitment and trust in supervision.

Health Benefit Satisfaction in the Public and Private Sectors 257

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Benefit Satisfaction

A large amount of research has been conducted in the last decade with
regard to pay satisfaction (see review by Heneman, 1985), but there is a
dearth of research examining benefit satisfaction as a separate outcome
(Milkovich & Newman, 1987). At most, a few questions regarding benefits
will be asked when individuals are questioned about pay satisfaction.
Research focusing on benefit satisfaction as a separate construct from pay
satisfaction has only come about in recent years (Lust & Danehower, 1990).

Benefits research tends to be atheoretical, and as a consequence we

have little theoretical guidance for managers as to what the components of
benefit satisfaction are, direction of causality, what the moderator of vari­
ables are or how it may differ from benefits equity. Danehower et al (1993)
argue that external equity comparisons are the basis for benefit satisfaction,
along with employee perception of the organization's financial ability to
offer desired benefits. Cost to employee, usage, employee needs, the em­
ployee education process, components of the benefit package, and personal
demographic characteristics are all variables that might influence benefit
satisfaction.

Studies examining the link between benefit characteristics and com­

pensation satisfaction have established that benefit availability, or the pres­
ence or absence of a benefit option, covaried with satisfaction (Berger, 1983;
Lust, 1986). Dreher et al (1988) found that benefit satisfaction increased with
improved coverage and decreased with greater employee contributions,
and that employees were particularly sensitive to variation in the cost of
health insurance. Anecdotal reports about health care indicate employees
are feeling less loyal and committed to their employers, experiencing re­
duced job satisfaction and motivation, and exhibiting counterproductive
behaviors. Many employees feel betrayed by employers who they feel no
longer protect them and their families from what could be catastrophic loss.

To date, the dimensionality of benefit satisfaction has not reached

consensus. First measured as a subscale of the PSQ Pay Satisfaction Ques­
tionnaire (Heneman & Schwab, 1985), and seen as unidimensional, it has
since been seen as bi-dimensional with cost and quality factors (Lust &
Danehower, 1992), or multi-dimensional (Miceli & Lane, 1991). Several
researchers are presently attempting to validate measures to accurately
reflect the dimensionality of benefit satisfaction, such as the ATBS Attitudes
Towards Benefits Scale (Carraher et al, 1992), the BSQ Benefit Satisfaction
Scale (Lust & Danehower, 1992), and work in progress by Balkin & Griffeth
(1992). Mounting evidence suggests that attitudes towards benefits are
quite complex and should be examined in a multi-dimensional context.

258 Public Personnel Management Volume 24 No. 3 (Fall, 1995)

Copyright © 2001. All Rights Reserved.

Employee health care, justice and benefit satisfaction

It's not empirically known whether employees assess benefit value by

comparing plans to those offered at other organizations. However, since
benefits are used to attract and retain employees, any perceived benefit
inequity might result in the organization actually looking less attractive, and
could result in reduced benefit satisfaction, job satisfaction, commitment,
motivation, productivity and increased propensity to quit, absenteeism,
turnover and dysfunctional behaviors that harm the organization. With
health care issues currently receiving widespread attention in the work­
place, understanding what principles of distributive and procedural justice
are relevant to employer provided health care and benefit satisfaction,
become an important question. Although previous research has not directly
focused on this question, there is compelling evidence that distributive and
procedural justice concerns are universal in scope, and apply to employee
benefits.

Due to the lack of theoretical or empirical linkages, exploratory analy­

sis was undertaken to more fully explore benefit satisfaction in the em­
ployee health care setting. The following hypotheses were derived to test
the justice literature as it applies to management of health care benefits.

HI: There will be significant differences between the satisfaction with

benefits for public and private employees.

H2: Equity perceptions (distributive justice) will have a main effect on

benefit satisfaction and will account for a significant amount of the variance.

H3: Procedural justice will have a main effect on benefit satisfaction

and will account for a significant amount of the variance.

Sample

Due to the aggressive healthcare measures of the private sector, we

sought to determine if those measures had caused significant consequences
in benefit satisfaction. Thus the present study used a convenience sample
of employees from two organizations: 354 employees of a large public
agency and 1068 employees of a large financial services organization.
Usable responses were received from 124 subjects in the public agency and
373 in the private organization, for response rates of 36% and 35%.

Health Benefit Satisfaction in the Public and Private Sectors 259

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 The variables in this study were operationalized using standardized
measures, descriptions of which follow. The validity and reliability of these
measures have been established in previous research.

1) Benefit Satisfaction. Benefit satisfaction was measured through a

four-item version of the subscale of Heneman & Schwab's (1985) Pay
Satisfaction Questionnaire (PSQ). Past psychometric studies of the PSQ
show support for the independence and internal consistency of the benefits
subscale (Heneman & Schwab, 1985). PSQ items were rewritten to reflect
health insurance benefits, such that "the current level of benefits" was
rewritten as, "the current level of my health insurance benefits" was rewrit­
ten as "the amount my company pays toward my health benefits." Rewrit­
ing the PSQ items was judged to be more sensitive to the measurement
objectives of this study, because it was only health benefits that were of
interest. Subjects responded using a five-point Likert scale ranging from
"very dissatisfied" to "very-satisfied."

2) Distributive Justice (equity). A three-item scale developed by

Lucero (1991) measured employee perceptions of fairness or equity of
health insurance benefits. The scale contained items such as "the fairness
of health benefits received" and "how my overall health benefit plan
compares to other companies." Subjects responded using a five-point
Likert scale ranging from "very dissatisfied" to "very satisfied."

3) Procedural justice. A version of a scale developed by Greenberg

(1990) was used to verify differences in how familiar subjects were with the
rationale or basis for establishing health insurance benefit levels, how well
the information was communicated, and how personal the organization
was in relaying the information. For example, items asked the subjects to
respond to questions such as "How adequate was your employer's expla­
nation regarding the basis for health insurance benefits offered?", "How
thoroughly did your employer communicate the basis for your current
health benefits to you?" and "How much concern did your employer show
about your feelings when communicating changes in your health insurance
benefits?" Subjects responded on a five-point Likert scale that ranged from
"not at all" to "extremely adequate."

4) Job Satisfaction. General job satisfaction was measured through

use of the Minnesota Satisfaction Questionnaire (MSQ) (Weiss, et al, 1967)
to assess affective reactions to the work dimensions of pay, work itself,
supervision, coworkers, promotion opportunities, and overall job satisfac­
tion. Affective measures of job satisfaction are considered to be better
predictors of job behaviors driven by affect, such as absenteeism and

260 Public Personnel Management Volume 24 No. 3 (Fall, 1995)

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turnover (Brief & Robertson, 1989). Subjects responded using a five-point
Likert scale ranging from "very dissatisfied" to "very satisfied".

5) Organizational Commitment The Organizational Commitment

Scales (Allen & Meyer, 1990) were used to measure a) affective commitment -
emotional, b) continuance commitment - the cost of leaving the organization,
and c) normative commitment -feelings of loyalty or obligation to the organi­
zation. This three component scale consisted of eight items each in the areas
of affective, continuance and normative commitment. Allen & Meyer (1990)
have demonstrated that these three components of organizational commit­
ment are empirically distinguishable constructs, and the need to be differ­
entiated in research because they each provide a different insight into the
employee-organization link. Subjects responded to a variety of statements
using a seven-point Likert scale that ranged from "strongly disagree" to
"strongly agree".

6) Quality of care. A two-item scale was constructed for the study to

measure employee perceptions regarding quality of care. The scale items
were "the technical quality of care received" and "the quality of children's
care received". Subjects responded using a five-point Likert scale ranging
from "very dissatisfied" to "very satisfied."

7) Convenience of care. An additional four-item scale was developed

to measure employee perceptions of convenience regarding physicians,
clinics, emergency rooms, and specialist locations. The convenience scale
contained items such as "the convenience of emergency room locations."
Subjects responded using a five-point Likert scale ranging from "very
dissatisfied" to "very satisfied."

8) Propensity to quit. Propensity to quit was measured by a six-item

scale developed by Ganster, Myes, Sime & Tharp (1982). Subjects re­
sponded to questions such as "which of the following statements most
clearly reflects your feelings about your future with this employer?" and
"do you expect to leave your job in the near future?" Subjects responded to
a five-point scale that ranged from "definitely will leave in the future" to
"will definitely not leave in the near future."

9) Behavioral response. Several items were designed to tap employee

behavioral responses to perceived health benefit inequities. Subjects were
asked to respond only if they had found themselves dissatisfied with health
insurance changes. Among the items were "complained to coworkers,
supervisor or benefits department", have been less motivated in my work,"
"take unnecessary sick days," and "have been active in my union to work
for changes." Subjects responded using a five-point Likert scale that
ranged from "never" to "always."

Health Benefit Satisfaction in the Public and Private Sectors 261

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 Reliability as measured by internal consistency provides support for
the construct validity of measures by indicating the degree of unidimen­
sionality of the operational measures. The preferred measure of reliability
is coefficient alpha, as it is indicative of the extent to which content sampling
and content heterogeneity serve as sources of error variance (Cascio, 1991;
Pedhazur & Schmelkin, 1991). For the scales, coefficient alpha was .75 for
benefit satisfaction, .81 for distributive justice, .84 for convenience of care,
.72 for quality of care, .83 for procedural justice, .72 for propensity to quit,
.85 for affective commitment, .81 for continuance commitment, .78 for
normative commitment, .92 for job satisfaction, and .85 for work motivation.
Operationally, the reported reliability of each measure in the current study
is adequate for research purposes (Cascio, 1991).

A putative weakness of diverse measures collected from one source is

the potential for method error, defined by Bagozzi (1993) as "variance
attributable to the measurement procedure(s) rather than to the construct
of interest" (p. 49). The importance of method error is it can confound the
interpretation of relationships between constructs by affecting the statistical
relationships (Bagozzi, 1993; Bagozzi, Yi & Phillips, 1991). A specific type
of method error relevant to the current study is the single source bias
(Avolio, Yammarino, & Bass, 1991). To test for the presence of common
method variance, the one factor test proposed by Harmon (1967) was
calculated. No general factor resulted, indicating common method vari­
ance did not account for a large amount of the variance in the surveys
(Huber, Seybolt & Venemon, 1992).

To determine if moderating influences existed which would cause the

results of an analysis of sector to be qualified, a subgrouping of the subjects
via gender was analyzed via a multivariate analysis of variance (MANOVA)
(Leigh et al, 1988; Orpen, 1985; Renn & Vandenburg, 1991). Appropriate
statistical tests were conducted to determine that the mathematical assump­
tions of MANOVAs were not violated. Given the unequal cell sizes, the
regression approach for calculating sums of squares was analyzed (Kirkpa­
trick & Nezlek, 1993).

The MANOVA for gender indicated a nonsignificant difference F (1,

472) = 1.24, p = .263. With gender as the independent variable, none of the
univariate analyses indicated a significant difference at the .05 level. There­
fore, the responses of all subjects were analyzed and subgrouping was
avoided so as to maximize statistical power and allow the generalizability
of the findings (Renn & Vandenberg, 1991). The MANOVA for public
versus private sectors indicated a significant difference F (1,472) = 13.96,
p < .001, thus supporting Hypothesis 1. The significant overall F - test serves
as a control on alpha errors when analyzing univariate results, as is mathe-

262 Public Personnel Management Volume 24 No. 3 (Fall, 1995)

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 matically superior to the often recommended Bonferroni procedure
(Fletcher, Daw, & Young, 1989).

Following the contention of Hubert and Morris (1989), the significance

of the multiple ANOVAs was reviewed due to their conceptual dissimilar­
ity. With sector as the independent variable, the univariate analysis indi­
cated significant differences on all but three scales: procedural justice,
propensity to quit, and job satisfaction. The F-values and descriptive sta­
tistics of the remaining scales are listed in Table 1.

Table 1 Univariate Analyses of Scales by Employing Sector of Employees

Public Sector Mean Private Sector Mean F-value p value

Scale
Benefit Satisfaction 3.76 3.54 8.99 .003
Distributive Justice 4.01 3.47 40.15 .000
Convenience of Care 3.78 3.30 30.36 .000
Quality of Care 3.46 3.22 6.09 .014
Affective Commitment 4.26 4.83 22.31 .000
Normative Commitment 3.67 3.43 5.94 .015

Following the MANOVAs, multiple regression was used to determine

the relative explanatory power of the constructs on the dependent variable
of satisfaction with benefits. The stepwise approach to variable entry was
selected in order to determine which of the variables thought to be associ­
ated with benefit satisfaction has the highest association (Henderson &
Denison, 1989). Bernstein et al, (1988) note the stepwise approach is useful
when the predictors are not based on theory and Bieber (1988) indicated
this procedure eases interpretation of the data. Rawlings (1988) empha­
sized that the use of the stepwise approach requires a check on the mathe­
matical assumptions of the use of multiple regression. Bieber (1988) noted
these mathematical assumptions include linearity, normality, and inde­
pendence of the independent variables. To check on these mathematical
assumptions as well as potential inadequacies in a model, residual analysis
is useful (Neter, Wasserman, & Kutner, 1989; Rawlings, 1988). In the current
study, an inspection of both a histogram and a normal probability plot of
standardized residuals indicated support for the appropriateness of the
linear regression function within both the samples of public or private sector
employees (Neter et al, 1989; Rawlings, 1988).

This analysis was followed by a separate regression analysis of the data

derived from the survey of public and private sector employees.

In the data derived from the survey of the public employees, initial
hierarchical regression analyses were used with the independent variables
being distributive justice, convenience of care, quality of care, procedural
justice, propensity to quit, affective commitment, continuance commit-

Health Benefit Satisfaction in the Public and Private Sectors 263

Copyright © 2001. All Rights Reserved.

 ment, normative commitment, and job satisfaction. The dependent vari­
able was the satisfaction with benefits.

Among the public sector employees, equity entered on step one with
an adjusted R2 of .58 and standard error of .49. The other variable to enter
the equation, affective commitment, resulted in an adjusted R2 of .63 and a
standard error of .46, thus supporting Hypothesis 2.

Among the private sector employees, equity entered on step one with
an adjusted R2 of .48 and standard error of .50. In contrast to the public
sector employees, the second variable was procedural justice, with an
adjusted R2 of .55 and a standard error of .47, supporting Hypothesis 3 for
private sector employees, but not the public sector. The third variable was
affective commitment, with an adjusted R2 of .57 and a standard error of
.46. The betas and their standard errors, along with the adjusted R2 and
standard errors, are reported on Table 2.

Table 2 Overall Results o f Regression Analysis for Benefit Satisfaction

Beta Beta SE Adjusted R2 R2SE

Public Sector:
Equity .76 .05 .58 .49
Affective
Commitment .22 .05 .63 .46

Private Sector:
Equity .69 .03 .48 .50
Procedural Justice .29 .03 .55 .47
Affective
Commitment .15 .03 .57 .46

Discussion and Conclusion

The results of this study provide further evidence that employee's

perceptions of organizational justice are important in determining their
satisfaction with health care benefits and adds to the literature documenting
the influence of procedural justice on employee attitudes and behavior.
The study also supports Organ's (1988) argument that procedural justice is
subordinate to distributive justice in employment situations. Distributive
justice accounted for approximately half the variance in benefit satisfaction
for both public and private sectors, while procedural justice accounted for
a smaller amount of the variance and only in the private sector. These
findings suggest that distributive and procedural justice perceptions are
important components of health benefit satisfaction and should be included
in measures of benefit satisfaction. Benefit satisfaction is a multifaceted

264 Public Personnel Management Volume 24 No. 3 (Fall, 1995)

Copyright © 2001. All Rights Reserved.

construct and clearly more complex when compared to unidimensional pay
satisfaction, and should be measured in a way that captures that complexity.

Equally interesting was the finding that affective commitment to the

organization contributed to satisfaction with health benefits in both public
and private sectors. This emotional component was assessed from re­
sponses to statements about being happy in the organization, feeling a part
of the whole, feelings of attachment, being part of a "family", a strong sense
of belonging, and the feeling that the organization's problems were their
own. A possible explanation for the role of affective commitment in benefit
satisfaction might lie in the last statement: feeling that the organization's
problems were their own. If employees do have a strong sense of the work
family and belonging, and understand that their employer is struggling
with health care cost containment as all employer's are, it's possible that
they feel that the health care crisis is their problem too and the burden must
be shared. Thus health benefit satisfaction would be greater for these
employees. In contrast, an employee with no emotional attachment to the
organization might perceive health benefit changes and cost sharing as
simply another way the employer is out to get them.

A qualitative review of employee comments on the surveys indicated

that the primary areas of discontent were the cost of health coverage, loss
of freedom of choice of physicians, clinic co-pays and being forced to change
doctors as the plans changed. Loss of choice appeared to be a particularly
sensitive issue, with comments such as "removal of the right to see the
doctor of our own choice was a significant loss," "I am willing to pay more
money for freedom of choice," and "the company regards this as an incon­
venience for a few people, and seems to be insensitive about what I consider
to be a very personal decision."

The significant differences between public and private sector employ­

ees also warrants some attention from management, as public sector em­
ployees (with the exception of affective commitment), were consistently
higher in levels of satisfaction on several variables. Given the differences
between the employment conditions, pay and benefits of the public and
private sectors, the findings are not unexpected. Private industry has been
far more aggressive in their cost containment efforts over recent years, and
this alone could account for the mean differences between the two sectors.
Public agencies have simply not dealt with the escalating health costs as
vigorously as has the private sector.

This study has several policy implications. Administrators who wish

to consider adopting measures or draw guidelines from this study will want
to begin with paying attention to employee perceptions of organizational
justice. The results of this study point directly toward employers seeking
employee opinions about changes, allowing for employee participation in
avenues such as focus groups, the value of employee notification, clear lines

Health Benefit Satisfaction in the Public and Private Sectors 265

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of communications, honest communication, giving justifiable sincere expla­
nations for plan alterations, treating employees consistently, respectfully
and civilly, and most of all, proactively viewing fairness a top priority when
altering health care plans. The evidence strongly suggests that organiza­
tions must not be driven solely by cost when evaluating health plans.

This is not to suggest that organizations give up control over the

design and implementation of their human resource systems, but rather it
suggests a way to prevent deterioration of employee work attitudes under
difficult circumstances. If employees respond to unfair changes and disre­
spectful treatment by reduced motivation, productivity, loyalty, job satis­
faction and com m itm ent to the organization, the actual costs of
containment are potentially far greater than any premium savings. When
employees feel they have been betrayed by an employer via unfair or costly
health benefit changes, it is difficult at best to maintain morale and a healthy
corporate climate.

Also, turnover is often the result of such perceived inequities, but with
the present state of health care in the United States, many employees are
continuing in jobs they would rather leave, simply to maintain health
benefits for their family or a member who would be uninsurable under a
new plan. Rather than leaving the organization, the employees are forced
by circumstance to stay, and the acrimony is often turned inward toward
the organization, with very dysfunctional consequences. The following
comments gathered from employees during this study illustrate this point.

"We got a patronizing letter back from the director of benefits. He said he had
to change his insurance too. Big deal. He'd sell his children out to a quack
doctor if he thought it would given him brownie points or seemed to be the
company thing to do. It has been one year and I am still mad. Will I stay mad?
You bet! Do I hold it against the company? You bet!"

"I felt we had the health care options stuffed down our throats. Either you
take what was offered or you are not covered. I felt as if I was stabbed in the
back."

Another policy implication is the education of employees about health

costs. Few employers have been aggressive in educating employees about
health care costs, matched social security contributions, workers' compen­
sation premiums, unemployment premiums, employer pension contribu­
tions, life insurance, etc. Employees are generally ignorant with regard to
such expenses, yet with employee benefits approaching 40% of total pay­
roll, organizations cannot afford to let employees continue to be unin­
formed. Annual benefit reports are a move in the right direction, but a
better policy would be to remind them of such costs right along side their
wages and payroll tax deductions. The administrative cost of adding an­
other column of figures on payroll stubs would be minimal, yet could have
a significant impact on employee awareness. Managers are losing out on

266 Public Personnel Management Volume 24 No. 3 (Fall, 1995)

Copyright © 2001...,All ,Biahts,.Resecved„

 an easy cost effective way to have an impact on employee attitudes and
behavior. Employee comments on surveys support this. "I went and
looked at my annual benefits summary and I was shocked at how far off I
was in estimating the value of my health insurance," and I really appreciate
my health insurance benefits once I saw how much they really cost."
Comments such as these reinforce management efforts to educate their
employees about benefit costs.

This study does have some limitations. Due to the atheoretical field
of benefit satisfaction, this was an exploratory study, and it was a cross-sec-
tional study rather than longitudinal. The use of a convenience sample
should also be noted, thus the sample was not random.

In conclusion, this study of organizational justice has implications for

practicing managers and researchers and provides an important contribu­
tion to the fields of employee compensation and organizational justice,
particularly to health insurance benefits.

References

Adams, J. (1965). Inequity in social exchanges. In L. Berkowitz (ed)., Advances in Experimental

Social Psychology. New York, New York. Vol. 2,267-299.

Adams, J. (1968). A framework for the study of modes of resolving inconsistency. In R.

Abelson, et al (Eds.), Theories o f cognitive Inconsistency: A Sourcebook. Chicago: Rand McNallv.
655-660.

Allen, N., & Meyer, J. (1990). The measurement and antecedents of affective, continuance and
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