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Where Do The Sick Go? Health Insurance and Employment in Small and Large Firms

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Author Info

  • Kanika Kapur

    ()
    (School of Economics, University College Dublin, Belfield, Dublin 4, Ireland)

  • José J. Escarce

    ()
    (Division of General Internal Medicine and Health Services Research, Department of Medicine, David Geffen School of Medicine at UCLA, Los Angeles, CA 90095, USA)

  • M Susan Marquis

    ()
    (RAND, 1200 South Hayes Street, Arlington, VA 22202, USA)

  • Kosali I. Simon

    ()
    (Department of Policy Analysis and Management, Cornell University, Ithaca, NY 14853, USA)

Abstract

Small firms that offer health insurance to their employees may face variable premiums if the firm hires an employee with high-expected health costs. To avoid expensive premium variability, a small firm may attempt to maintain a workforce with low-expected health costs. In addition, workers with high-expected health costs may prefer employment in larger firms with health insurance rather than in smaller firms. This results in employment distortions. We examine the magnitude of these employment distortions in hiring, employment, and separations using the Medical Expenditure Panel Survey from 1996 to 2001. We find that workers with high-expected health costs are less likely to be new hires in insured small firms and are less likely to be employed in insured small firms. We find no evidence that state small group health insurance reforms designed to restrict insurers' ability to deny coverage and restrict premium variability have reduced the extent of these distortions.

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Bibliographic Info

Article provided by Southern Economic Association in its journal Southern Economic Journal.

Volume (Year): 74 (2008)
Issue (Month): 3 (January)
Pages: 644-664

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Handle: RePEc:sej:ancoec:v:74:3:y:2008:p:644-664

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  1. Thomas Buchmueller & John Dinardo, 2002. "Did Community Rating Induce an Adverse Selection Death Spiral? Evidence from New York, Pennsylvania, and Connecticut," American Economic Review, American Economic Association, American Economic Association, vol. 92(1), pages 280-294, March.
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  11. Kanika Kapur, 2003. "Labor Market Implications of State Small Group Health Insurance Reform," Public Finance Review, , , vol. 31(6), pages 571-600, November.
  12. Robert Kaestner & Kosali Ilayperuma Simon, 2002. "Labor market consequences of state health insurance regulation," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 56(1), pages 136-159, October.
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  15. Frank A. Scott & John Garen & Mark Berger, 1995. "Do health insurance and pension costs reduce the job opportunities of older workers?," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 48(4), pages 775-791, July.
  16. Alan C. Monheit & Jessica Primoff Vistnes, 2006. "Health Insurance Enrollment Decisions: Preferences for Coverage, Worker Sorting, and Insurance Take Up," NBER Working Papers 12429, National Bureau of Economic Research, Inc.
  17. Manning, Willard G. & Mullahy, John, 2001. "Estimating log models: to transform or not to transform?," Journal of Health Economics, Elsevier, Elsevier, vol. 20(4), pages 461-494, July.
  18. Kanika Kapur, 1998. "The Impact of health on job mobility: A measure of job lock," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 51(2), pages 282-298, January.
  19. Davidoff, Amy & Blumberg, Linda & Nichols, Len, 2005. "State health insurance market reforms and access to insurance for high-risk employees," Journal of Health Economics, Elsevier, Elsevier, vol. 24(4), pages 725-750, July.
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Cited by:
  1. Chu-Shiu Li & Chwen-Chi Liu & Yu-Chen Kuo & Chen-Sheng Yang, 2013. "Health insurance provision and labor contracts for small firms," Small Business Economics, Springer, Springer, vol. 40(2), pages 325-334, February.

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