The Value of Employer-Sponsored Health Insurance

29 Pages Posted: 30 Mar 2021

See all articles by Casey B. Mulligan

Casey B. Mulligan

University of Chicago; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: March 29, 2021

Abstract

Based on published estimates of its price elasticity of demand and of tax wedges, as well as the method of revealed preference, I estimate that the annual social value of ESI is about $1.5 trillion beyond what policyholders, their employers, and taxpayers pay for it. The private component of that value, which in some respects is the other side of “job lock,” derives in part from group plans, with the group determined by many characteristics other than the demand for healthcare. With voluntary groups formed this way, adverse risk selection is reduced, the groups can be effective at obtaining substantial discounts and rebates for their members, and division of labor employed in shopping for health providers. ESI is also a mechanism for employers to act on their incentives for a healthy and productive workforce. External effects include tax externalities (in both directions), encouraging work, and easing government expenditure obligations by helping to prevent people from going without health insurance.

JEL Classification: D40,D71,H30,I13,J32

Suggested Citation

Mulligan, Casey B., The Value of Employer-Sponsored Health Insurance (March 29, 2021). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2021-33, Available at SSRN: https://ssrn.com/abstract=3815835 or http://dx.doi.org/10.2139/ssrn.3815835

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