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The Value of Employer-Sponsored Health Insurance

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  • Casey B. Mulligan

Abstract

Based on published estimates of its price elasticity of demand and of tax wedges, as well as the method of revealed preference, I estimate that the annual social value of ESI is about $1.5 trillion beyond what policyholders, their employers, and taxpayers pay for it. The private component of that value, which in some respects is the other side of “job lock,” derives in part from group plans, with the group determined by many characteristics other than the demand for healthcare. With voluntary groups formed this way, adverse risk selection is reduced, the groups can be effective at obtaining substantial discounts and rebates for their members, and division of labor employed in shopping for health providers. ESI is also a mechanism for employers to act on their incentives for a healthy and productive workforce. External effects include tax externalities (in both directions), encouraging work, and easing government expenditure obligations by helping to prevent people from going without health insurance.

Suggested Citation

  • Casey B. Mulligan, 2021. "The Value of Employer-Sponsored Health Insurance," NBER Working Papers 28590, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:28590
    Note: EH IO PE
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    More about this item

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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