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The reallocation of compensation in response to health insurance premium increases

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  • Goldman, Dana P.
  • Sood, Neeraj
  • Leibowitz, Arleen

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
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  • Goldman, Dana P. & Sood, Neeraj & Leibowitz, Arleen, 2005. "The reallocation of compensation in response to health insurance premium increases," Economics Letters, Elsevier, vol. 88(2), pages 147-151, August.
    • Handle: RePEc:eee:ecolet:v:88:y:2005:i:2:p:147-151
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    Cited by:

    1. Stéphanie Lluis & Jean Abraham, 2013. "The Wage–Health Insurance Trade-off and Worker Selection: Evidence From the Medical Expenditure Panel Survey 1997 to 2006," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 52(2), pages 541-581, April.
    2. Patricia Crifo & Marc-Arthur Diaye, 2011. "The Composition of Compensation Policy: From Cash to Fringe Benefits," Annals of Economics and Statistics, GENES, issue 101-102, pages 307-326.
    3. Vikström, Johan, 2009. "The effect of employer incentives in social insurance on individual wages," Working Paper Series 2009:13, IFAU - Institute for Evaluation of Labour Market and Education Policy.

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    JEL classification:

    • I2 - Health, Education, and Welfare - - Education

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