Worker Sorting, Taxes and Health Insurance Coverage

37 Pages Posted: 27 Jun 2007 Last revised: 10 Nov 2011

See all articles by Kevin Lang

Kevin Lang

Boston University - Department of Economics; National Bureau of Economic Research (NBER)

Hong Kang

Boston University - Department of Economics

Date Written: April 2007

Abstract

We develop a model in which firms hire heterogeneous workers but must offer all workers insurance benefits under similar terms. In equilibrium, some firms offer free health insurance, some require an employee premium payment and some do not offer insurance. Making the employee contribution pre-tax lowers the cost to workers of a given employee premium and encourages more firms to charge. This increases the offer rate, lowers the take-up rate, increases (decreases) coverage among high (low) demand groups, with an indeterminate overall effect. We test the model using the expansion of section 125 plans between 1987 and 1996. The results are generally supportive.

Suggested Citation

Lang, Kevin and Kang, Hong, Worker Sorting, Taxes and Health Insurance Coverage (April 2007). NBER Working Paper No. w13066, Available at SSRN: https://ssrn.com/abstract=986916

Kevin Lang (Contact Author)

Boston University - Department of Economics ( email )

270 Bay State Road
Boston, MA 02215
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National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Hong Kang

Boston University - Department of Economics ( email )

270 Bay State Road
Boston, MA 02215
United States

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