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Does retiree health insurance encourage early retirement?

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  • Nyce, Steven
  • Schieber, Sylvester J.
  • Shoven, John B.
  • Slavov, Sita Nataraj
  • Wise, David A.

Abstract

The strong link between health insurance and employment in the United States may cause workers to delay retirement until they become eligible for Medicare at age 65. However, some employers extend health insurance benefits to their retirees, and individuals who are eligible for such retiree health benefits need not wait until age 65 to retire with group health coverage. We investigate the impact of retiree health insurance on early retirement using employee-level data from 54 diverse firms that are clients of Towers Watson, a leading benefits consulting firm. We find that retiree health coverage has its strongest effects at ages 62 through 64. Coverage that includes an employer contribution is associated with a 6.3 percentage point (36.2%) increase in the probability of turnover at age 62, a 7.7 percentage point (48.8%) increase in the probability of turnover at age 63, and a 5.5 percentage point (38.0%) increase in the probability of turnover at age 64. Conditional on working at age 57, such coverage reduces the expected retirement age by almost three months and reduces the total number of person-years worked between ages 58 and 64 by 5.6%.

Suggested Citation

  • Nyce, Steven & Schieber, Sylvester J. & Shoven, John B. & Slavov, Sita Nataraj & Wise, David A., 2013. "Does retiree health insurance encourage early retirement?," Journal of Public Economics, Elsevier, vol. 104(C), pages 40-51.
  • Handle: RePEc:eee:pubeco:v:104:y:2013:i:c:p:40-51
    DOI: 10.1016/j.jpubeco.2013.04.007
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    Cited by:

    1. Shoven, John B. & Slavov, Sita Nataraj, 2014. "The role of retiree health insurance in the early retirement of public sector employees," Journal of Health Economics, Elsevier, vol. 38(C), pages 99-108.
    2. Clark, Robert L. & Mitchell, Olivia S., 2014. "How does retiree health insurance influence public sector employee saving?," Journal of Health Economics, Elsevier, vol. 38(C), pages 109-118.
    3. Joshua Congdon-Hohman, 2014. "Retirement Reversals and Health Insurance: the Potential Impact of the Affordable Care Act," Working Papers 1501, College of the Holy Cross, Department of Economics.
    4. Fitzpatrick, Maria D., 2014. "Retiree health insurance for public school employees: Does it affect retirement?," Journal of Health Economics, Elsevier, vol. 38(C), pages 88-98.
    5. Alan L. Gustman & Thomas L. Steinmeier & Nahid Tabatabai, 2016. "The Affordable Care Act as Retiree Health Insurance: Implications for Retirement and Social Security Claiming," NBER Working Papers 22815, National Bureau of Economic Research, Inc.
    6. Clark, Robert L. & Morrill, Melinda Sandler & Vanderweide, David, 2014. "The effects of retiree health insurance plan characteristics on retirees’ choice and employers’ costs," Journal of Health Economics, Elsevier, vol. 38(C), pages 119-129.
    7. Mark Duggan & Gopi Shah Goda & Emilie Jackson, 2017. "The Effects of the Affordable Care Act on Health Insurance Coverage and Labor Market Outcomes," NBER Working Papers 23607, National Bureau of Economic Research, Inc.
    8. Helen Levy & Thomas Buchmueller & Sayeh Nikpay, 2015. "The Effect of Health Reform on Retirement," Working Papers wp329, University of Michigan, Michigan Retirement Research Center.
    9. Jane G. Gravelle & Sean Lowry, 2016. "The Affordable Care Act, Labor Supply, and Social Welfare," National Tax Journal, National Tax Association, vol. 69(4), pages 863-882, December.
    10. Gelb, Betsy DuBois & Longacre, Teri Elkins, 2014. "Marketing retirement—or staying on the job," Business Horizons, Elsevier, vol. 57(5), pages 627-635.
    11. repec:nbr:nberch:14052 is not listed on IDEAS

    More about this item

    Keywords

    Retiree health insurance; Medicare; Retirement; Turnover;

    JEL classification:

    • I1 - Health, Education, and Welfare - - Health
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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