Wage and Benefit Changes in Response to Rising Health Insurance
AbstractMany companies have defined-contribution benefit plans requiring employees to pay the full cost (before taxes) of more generous health insurance choices. Research has shown that employee decisions are quite responsive to these arrangements. What is less clear is how the total compensation package changes when health insurance premiums rise. This paper examines employee compensation decisions during a three-year period when health insurance premiums were rising rapidly. The data come from a single large firm with a flexible benefits plan wherein employees explicitly choose how to allocate compensation between cash wages and other benefits. Under such an arrangement, higher health insurance premiums must induce changes in the composition of total compensationeither in lower after-tax wages or in decreased contributions to other benefits. The results suggest that about two-thirds of the premium increase is financed out of cash wages and the remaining one-thirds is financed by a reduction in benefits.
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Bibliographic InfoArticle provided by De Gruyter in its journal Forum for Health Economics & Policy.
Volume (Year): 8 (2005)
Issue (Month): 1 (January)
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Web page: http://www.degruyter.com
Other versions of this item:
- Dana P. Goldman & Neeraj Sood & Arleen Leibowitz, 2005. "Wage and Benefit Changes in Response to Rising Health Insurance," NBER Chapters, in: Frontiers in Health Policy Research, Volume 8 National Bureau of Economic Research, Inc.
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- Adams, Scott, 2007. "Health insurance market reform and employee compensation: The case of pure community rating in New York," Journal of Public Economics, Elsevier, vol. 91(5-6), pages 1119-1133, June.
- Jessica Vistnes & Thomas Selden, 2011. "Premium growth and its effect on employer-sponsored insurance," International Journal of Health Care Finance and Economics, Springer, vol. 11(1), pages 55-81, March.
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