Employer Health Insurance Mandates and the Risk of Unemployment

24 Pages Posted: 9 Apr 2012

See all articles by Katherine Baicker

Katherine Baicker

Harvard University - Department of Health Policy & Management; National Bureau of Economic Research (NBER)

Helen Levy

University of Michigan at Ann Arbor - Institute for Social Research (ISR); National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: Spring 2008

Abstract

Employer health insurance mandates form the basis of many health care reform proposals. Proponents make the case that they will increase insurance, while opponents raise the concern that low‐wage workers will see offsetting reductions in their wages and that in the presence of minimum wage laws some of the lowest wage workers will become unemployed. We construct an estimate of the number of workers whose wages are so close to the minimum wage that they cannot be lowered to absorb the cost of health insurance, using detailed data on wages, health insurance, and demographics from the Current Population Survey (CPS). We find that 33 percent of uninsured workers earn within $3 of the minimum wage, putting them at risk of unemployment if their employers were required to offer insurance. Assuming an elasticity of employment with respect to minimum wage increase of ‐0.10, we estimate that 0.2 percent of all full‐time workers and 1.4 percent of uninsured full‐time workers would lose their jobs because of a health insurance mandate. Workers who would lose their jobs are disproportionately likely to be high school dropouts, minority, and female. This risk of unemployment should be a crucial component in the evaluation of both the effectiveness and distributional implications of these policies relative to alternatives such as tax credits, Medicaid expansions, and individual mandates, and their broader effects on the well‐being of low‐wage workers.

Suggested Citation

Baicker, Katherine and Levy, Helen, Employer Health Insurance Mandates and the Risk of Unemployment (Spring 2008). Risk Management and Insurance Review, Vol. 11, Issue 1, pp. 109-132, 2008, Available at SSRN: https://ssrn.com/abstract=2036133 or http://dx.doi.org/10.1111/j.1540-6296.2008.00133.x

Katherine Baicker (Contact Author)

Harvard University - Department of Health Policy & Management ( email )

677 Huntington Avenue
Boston, MA 02115
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
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Helen Levy

University of Michigan at Ann Arbor - Institute for Social Research (ISR) ( email )

Ann Arbor, MI 48106-1248
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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