ERISA, Agency Costs, and the Future of Health Care in the United States
36 Pages Posted: 31 Mar 2008 Last revised: 17 Aug 2010
Because so many Americans receive health insurance through their employers, the Employee Retirement Income Security Act of 1974 (ERISA) plays a dominant role in the delivery of healthcare in the United States. The ERISA system enables employers and insurers to save money by providing inadequate healthcare to employees, thereby creating incentives for these agents to act contrary to the interests of their principals. Such agency costs play a significant role in the current healthcare crisis and require attention when considering reform. We evaluate the two major healthcare reform movements by exploring the extent to which each reduces agency costs. We find that agency cost analysis clarifies the benefits, limits, and uncertainties of each approach.
Keywords: ERISA, agency costs
JEL Classification: K19
Suggested Citation: Suggested Citation