Health Insurance and Early Retirement: Evidence from the Availability of Continuation Coverage

49 Pages Posted: 2 Oct 2007 Last revised: 23 Jul 2010

See all articles by Jonathan Gruber

Jonathan Gruber

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

Brigitte C. Madrian

Brigham Young University Marriott School of Business; National Bureau of Economic Research (NBER)

Date Written: December 1993

Abstract

Although the vast majority of working individuals aged 55-64 receive health insurance coverage through their employment, many of these individuals face the prospect of losing such coverage should they retire before becoming eligible for guaranteed public coverage through Medicare at age 65. Because the expected medical expenses of this group are large and uncertain, the availability of health insurance coverage after retirement could be a key factor in the retirement decision of older workers. We examine the effect of health insurance on retirement by looking at variation in state and federal 'continuation of coverage' mandates, laws which allow individuals to continue purchasing health insurance through a previous employer for a specified number of months after leaving the firm. By allowing individuals to maintain their employer-provided health insurance after retirement, these laws decrease the cost of early retirement for those who do not have other retiree health insurance available. Using data on 55-64 year old men from the Current Population Survey, we find that one year of continuation benefits increases the probability of being retired by 1 percentage point; this represents a 5.4 percent increase in the baseline probability of being retired for this group. We also find that continuation mandates increase the likelihood of being insured after retirement.

Suggested Citation

Gruber, Jonathan and Madrian, Brigitte C., Health Insurance and Early Retirement: Evidence from the Availability of Continuation Coverage (December 1993). NBER Working Paper No. w4594. Available at SSRN: https://ssrn.com/abstract=480282

Jonathan Gruber (Contact Author)

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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HOME PAGE: http://web.mit.edu/gruberj/www/

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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Brigitte C. Madrian

Brigham Young University Marriott School of Business ( email )

Provo, UT 84602
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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