Who Pays for Obesity? Evidence from Health Insurance Benefit Mandates

Abstract

Is there an obesity externality? A quasi-random natural experiment shows no evidence for the claim that the obese pass their health costs on to others through employer-based health insurance. In the late 1990’s and early 2000’s, many state governments began requiring health insurance plans to cover treatments for diabetes. These treatments are expensive, and diabetes is about four more prevalent among the obese, so the mandates raised the relative cost of insuring obese people. Using difference-in-difference analysis of restricted geocode data from the 1979 National Longitudinal Survey of Youth to compare wages across states with and without diabetes mandates, I find that obese people pay for all of their own increased health costs in the form of lower wages, rather than passing them on to employers, insurers, and co-workers.

Keywords: Obesity, Employer-Based Health Insurance, NLSY geocode, Diabetes Mandates

JEL Classification: I10, J30