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How Does Retiree Health Insurance Influence Public Sector Employee Saving?

In: State and Local Health Plans for Active and Retired Public Employees

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  • Robert L. Clark
  • Olivia S. Mitchell

Abstract

Economic theory predicts that employer-provided retiree health insurance (RHI) benefits have a crowd-out effect on household wealth accumulation, not dissimilar to the effects reported elsewhere for employer pensions, Social Security, and Medicare. Nevertheless, we are unaware of any similar research on the impacts of retiree health insurance per se. Accordingly, the present paper utilizes a unique data file on respondents to the Health and Retirement Study, to explore how employer-provided retiree health insurance may influence net household wealth among public sector employees, where retiree healthcare benefits are still quite prevalent. Key findings include the following:-Most full-time public sector employees anticipate having employer-provided health insurance coverage in retirement, unlike most private sector workers.-Public sector employees covered by RHI had substantially less wealth than similar private sector employees without RHI. In our data, Federal workers had about $82,000 (18%) less net wealth than private sector employees lacking RHI; state/local workers with RHI accumulated about $69,000 (or 15%) less net wealth than their uninsured private sector counterparts.-After controlling on socioeconomic status and differences in pension coverage, net household wealth for Federal employees was $116,000 less than workers without RHI and the result is statistically significant; the state/local difference was not.
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Suggested Citation

  • Robert L. Clark & Olivia S. Mitchell, 2013. "How Does Retiree Health Insurance Influence Public Sector Employee Saving?," NBER Chapters,in: State and Local Health Plans for Active and Retired Public Employees National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberch:13290
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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. Morrill, Melinda Sandler, 2014. "Active and retired public employees’ health insurance: Potential data sources," Journal of Health Economics, Elsevier, vol. 38(C), pages 147-152.

    More about this item

    JEL classification:

    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare

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