ERIU Funded Research Projects

Author: Royalty, Anne Beeson ; Abraham, Jean
Working Paper: Health Insurance and Labor Market Outcomes: Joint Decision-Making Within Households (PDF) ; January 2005

Research Findings (HTML)

Abstract:
Most Americans obtain access to health insurance through an employer. In this paper, we ask how the link between health insurance and employment affects labor market choices about whether to work and type of job. To understand the effect of the incentives embedded in the employer-based insurance system, we study the joint decision-making of husbands and wives that determines the household’s access to health insurance. We estimate the effect of husband’s (wife’s) health insurance on the labor market decisions of wives (husbands), allowing the health insurance and other labor market outcomes of both spouses to be endogenous. Obtaining unbiased estimates of such effects is complicated by the likelihood that positive assortative mating creates correlations between a couple’s characteristics and the possibility that there are important unobservable household income effects. Our innovation is to measure these biases by examining a second fringe benefit, paid sick leave, in addition to health insurance. Since we do not expect that spouse’s health insurance has any behavioral effect on own sick leave, any estimated effect should be due to the correlations induced by assortative mating and shared household income. We can then net out these effects from our estimates in the health insurance equation to obtain the behavioral effect of spouse’s insurance on own insurance. We find that, as predicted, spouse’s insurance has statistically significant negative effects on being offered own employer insurance, on own labor force participation, on own probability of working full-time, and on own probability of working at a large establishment. These behavioral effects are symmetric for husbands and wives in two-earner households.

Author: Royalty, Anne ; Hagens, John
Working Paper: The Effect of Premiums on the Decision to Participate in Health Insurance and Other Fringe Benefits Offered by the Employer: Evidence from a Real-World Experiment (PDF) ; July 2003

Research Findings (HTML)

Abstract:
In this paper we investigate the effects of the out-of-pocket premium on the decision to enroll in employer health insurance and other benefit plans including dental insurance, vision care, long-term care insurance, and wellness benefits. Previous estimates of the effects of premium on takeup of health insurance could be biased toward zero due to a correlation between premium and unobservable demand or plan quality. We solve this problem using data representing hypothetical choices by employees under three different price regimes, providing price variation uncorrelated with either individual-specific or plan-specific unobservables. We find that workers are insensitive to price in health insurance takeup. Workers show much greater price sensitivity to decisions about dental insurance, vision plans, long-term care insurance, and wellness benefits. We conclude that premium subsidies are unlikely to have a substantial impact on increasig insurance rates of workers already offered employer insurance.