The Reallocation of Compensation in Response to Health Insurance Premium Increases

18 Pages Posted: 13 Mar 2003 Last revised: 1 Nov 2010

See all articles by Dana P. Goldman

Dana P. Goldman

RAND Corporation; National Bureau of Economic Research (NBER)

Arleen Leibowitz

UCLA School of Public Affairs

Neeraj Sood

University of Southern California; National Bureau of Economic Research (NBER); RAND Corporation; University of Southern California - Schaeffer Center for Health Policy and Economics

Date Written: March 2003

Abstract

This paper examines how compensation packages change when health insurance premiums rise. We use data on employee choices within a single large firm with a flexible benefits plan; an increasingly common arrangement among medium and large firms. In these companies, employees explicitly choose how to allocate compensation between cash and various benefits such as retirement, medical insurance, life insurance, and dental benefits. We find that a $1 increase in the price of health insurance leads to 52-cent increase in expenditures on health insurance. Approximately 2/3 of this increase is financed through reduced wages and 1/3 through other benefits

Suggested Citation

Goldman, Dana P. and Leibowitz, Arleen and Sood, Neeraj, The Reallocation of Compensation in Response to Health Insurance Premium Increases (March 2003). NBER Working Paper No. w9540. Available at SSRN: https://ssrn.com/abstract=386169

Dana P. Goldman (Contact Author)

RAND Corporation ( email )

P.O. Box 2138
Santa Monica, CA 90407-2138
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
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Arleen Leibowitz

UCLA School of Public Affairs ( email )

Box 951656
Los Angeles, CA 90095-1656
United States

Neeraj Sood

University of Southern California ( email )

2250 Alcazar Street
Los Angeles, CA 90089
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

RAND Corporation ( email )

P.O. Box 2138
1776 Main Street
Santa Monica, CA 90407-2138
United States

University of Southern California - Schaeffer Center for Health Policy and Economics ( email )

635 Downey Way
Los Angeles, CA 90089-3333
United States

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