Health Insurance Benefit Mandates and the Firm-Size Distribution

31 Pages Posted: 4 Sep 2015

See all articles by James B. Bailey

James B. Bailey

Providence College Department of Economics

Douglas A. Webber

Temple University - Department of Economics

Abstract

By 2010, the average US state had passed 37 health insurance benefit mandates (laws requiring health insurance plans to cover certain additional services). Previous work has shown that these mandates likely increase health insurance premiums, which in turn could make it more costly for firms to compensate employees. Using 1996–2010 data from the Quarterly Census of Employment and Wages and a novel instrumental variables strategy, we show that there is limited evidence that mandates reduce employment. However, we find that mandates lead to a distortion in firm size, benefiting larger firms that are able to self-insure and thus exempt themselves from these state-level health insurance regulations. This distortion in firm size away from small businesses may lead to substantial decreases in productivity and economic growth.

Keywords: health insurance, benefit mandates, self-insurance, interest groups, employment, firm size

JEL Classification: L51, I13, I18, J32

Suggested Citation

Bailey, James B. and Webber, Douglas A., Health Insurance Benefit Mandates and the Firm-Size Distribution. Available at SSRN: https://ssrn.com/abstract=2655332 or http://dx.doi.org/10.2139/ssrn.2655332

James B. Bailey (Contact Author)

Providence College Department of Economics ( email )

1 Cunningham Sq
Providence, RI 02918
United States

HOME PAGE: http://https://economics.providence.edu/faculty-members/james-bailey/

Douglas A. Webber

Temple University - Department of Economics ( email )

Philadelphia, PA 19122
United States

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