The Labor Market Effects of Rising Health Insurance Premiums

37 Pages Posted: 29 Mar 2005 Last revised: 1 Jul 2010

See all articles by Katherine Baicker

Katherine Baicker

Harvard University - Department of Health Policy & Management; National Bureau of Economic Research (NBER)

Amitabh Chandra

Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Date Written: February 2005

Abstract

Since 2000, premiums for employer-provided health insurance have increased by 59 percent with little corresponding increase in the generosity of coverage. The effect of this increase in costs on wages and employment will depend on workers' valuation of the benefit, the elasticities of labor supply and demand, and institutional constraints on employers' ability to lower wages. Measuring these effects is difficult, however, without a source of exogenous variation in the cost of benefits. We use variation in medical malpractice payments driven by the recent "medical malpractice crisis" to identify the causal effect of rising health insurance premiums on wages, employment, and health insurance coverage. We estimate that a 10 percent increase in health insurance premiums reduces the aggregate probability of being employed by 1.6 percent and hours worked by 1 percent, and increases the likelihood that a worker is employed only part-time by 1.9 percent. For workers covered by employer provided health insurance, this increase in premiums results in an offsetting decrease in wages of 2.3 percent. Thus, rising health insurance premiums may both increase the ranks of the unemployed and place an increasing burden on workers through decreased wages for workers with employer health insurance and decreased hours for workers moved from full time jobs with benefits to part time jobs without.

Suggested Citation

Baicker, Katherine and Chandra, Amitabh, The Labor Market Effects of Rising Health Insurance Premiums (February 2005). NBER Working Paper No. w11160, Available at SSRN: https://ssrn.com/abstract=673247

Katherine Baicker (Contact Author)

Harvard University - Department of Health Policy & Management ( email )

677 Huntington Avenue
Boston, MA 02115
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Amitabh Chandra

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
84
Abstract Views
1,283
rank
326,317
PlumX Metrics