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Health Insurance and Early Retirement: Evidence from the Availability of Continuation Coverage

In: Advances in the Economics of Aging

Author

Listed:
  • Jonathan Gruber
  • Brigitte C. Madrian

Abstract

Although the vast majority of working individuals aged 55-64 receive health insurance coverage through their employment, many of these individuals face the prospect of losing such coverage should they retire before becoming eligible for guaranteed public coverage through Medicare at age 65. Because the expected medical expenses of this group are large and uncertain, the availability of health insurance coverage after retirement could be a key factor in the retirement decision of older workers. We examine the effect of health insurance on retirement by looking at variation in state and federal 'continuation of coverage' mandates, laws which allow individuals to continue purchasing health insurance through a previous employer for a specified number of months after leaving the firm. By allowing individuals to maintain their employer-provided health insurance after retirement, these laws decrease the cost of early retirement for those who do not have other retiree health insurance available. Using data on 55-64 year old men from the Current Population Survey, we find that one year of continuation benefits increases the probability of being retired by 1 percentage point; this represents a 5.4 percent increase in the baseline probability of being retired for this group. We also find that continuation mandates increase the likelihood of being insured after retirement.
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Suggested Citation

  • Jonathan Gruber & Brigitte C. Madrian, 1996. "Health Insurance and Early Retirement: Evidence from the Availability of Continuation Coverage," NBER Chapters,in: Advances in the Economics of Aging, pages 115-146 National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberch:7320
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    References listed on IDEAS

    as
    1. Gruber, J., 1992. "State Mandated Benefits and Employer Provided Health Insurance," Working papers 92-18, Massachusetts Institute of Technology (MIT), Department of Economics.
    2. Jacobson, Louis S & LaLonde, Robert J & Sullivan, Daniel G, 1993. "Earnings Losses of Displaced Workers," American Economic Review, American Economic Association, pages 685-709.
    3. James H. Stock & David A. Wise, 1990. "The Pension Inducement to Retire: An Option Value Analysis," NBER Chapters,in: Issues in the Economics of Aging, pages 205-230 National Bureau of Economic Research, Inc.
    4. Robin L. Lumsdaine & James H. Stock & David A. Wise, 1992. "Three Models of Retirement: Computational Complexity versus Predictive Validity," NBER Chapters,in: Topics in the Economics of Aging, pages 21-60 National Bureau of Economic Research, Inc.
    5. John Bound & Timothy Waidmann, 1992. "Disability Transfers, Self-Reported Health, and the Labor Force Attachment of Older Men: Evidence from the Historical Record," The Quarterly Journal of Economics, Oxford University Press, vol. 107(4), pages 1393-1419.
    6. Jonathan Gruber & Brigitte C. Madrian, 1993. "Limited Insurance Portability and Job Mobility: The Effects of Public Policy on Job-Lock," NBER Working Papers 4479, National Bureau of Economic Research, Inc.
    7. Gruber, Jonathan & Madrian, Brigitte C, 1995. "Health-Insurance Availability and the Retirement Decision," American Economic Review, American Economic Association, pages 938-948.
    8. Gloria J. Bazzoli, 1985. "The Early Retirement Decision: New Empirical Evidence on the Influence of Health," Journal of Human Resources, University of Wisconsin Press, vol. 20(2), pages 214-234.
    9. Robin L. Lumsdaine & James H. Stock & David A. Wise, 1992. "Pension Plan Provisions and Retirement: Men & Women, Medicare, and Models," NBER Working Papers 4201, National Bureau of Economic Research, Inc.
    10. Hurd, Michael D, 1990. "Research on the Elderly: Economic Status, Retirement, and Consumption and Saving," Journal of Economic Literature, American Economic Association, pages 565-637.
    11. Heckman, J.J. & Hotz, V.J., 1988. "Choosing Among Alternative Nonexperimental Methods For Estimating The Impact Of Social Programs: The Case Of Manpower Training," University of Chicago - Economics Research Center 88-12, Chicago - Economics Research Center.
    12. Jonathan Gruber, 1992. "State Mandated Benefits and Employer Provided Health Insurance," NBER Working Papers 4239, National Bureau of Economic Research, Inc.
    13. David A. Wise, 1992. "Introduction to "Topics in the Economics of Aging"," NBER Chapters,in: Topics in the Economics of Aging, pages 1-19 National Bureau of Economic Research, Inc.
    14. Jacobson, Louis S & LaLonde, Robert J & Sullivan, Daniel G, 1993. "Earnings Losses of Displaced Workers," American Economic Review, American Economic Association, pages 685-709.
    15. Glenn T. Sueyoshi, 1989. "Social Security and the Determinants of Full and Partial Retirement: A Competing Risks Analysis," NBER Working Papers 3113, National Bureau of Economic Research, Inc.
    16. Gary Burtless, 1986. "Social Security, Unanticipated Benefit Increases, and the Timing of Retirement," Review of Economic Studies, Oxford University Press, vol. 53(5), pages 781-805.
    17. David A. Wise, 1992. "Topics in the Economics of Aging," NBER Books, National Bureau of Economic Research, Inc, number wise92-1.
    18. Stock, James H & Wise, David A, 1990. "Pensions, the Option Value of Work, and Retirement," Econometrica, Econometric Society, vol. 58(5), pages 1151-1180, September.
    19. Gruber, Jonathan & Madrian, Brigitte C, 1995. "Health-Insurance Availability and the Retirement Decision," American Economic Review, American Economic Association, pages 938-948.
    20. Gruber, J., 1992. "The Efficiency of a Group-Specific Mandated Benefit: Evidence from Health Insurance Benefits for Maternity," Working papers 92-19, Massachusetts Institute of Technology (MIT), Department of Economics.
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    Cited by:

    1. Jonathan Gruber & Brigitte C. Madrian, 1993. "Limited Insurance Portability and Job Mobility: The Effects of Public Policy on Job-Lock," NBER Working Papers 4479, National Bureau of Economic Research, Inc.
    2. Jonathan Gruber & Brigitte C. Madrian, 2002. "Health Insurance, Labor Supply, and Job Mobility: A Critical Review of the Literature," JCPR Working Papers 255, Northwestern University/University of Chicago Joint Center for Poverty Research.
    3. Robin L. Lumsdaine & James H. Stock & David A. Wise, 1996. "Why Are Retirement Rates So High at Age 65?," NBER Chapters,in: Advances in the Economics of Aging, pages 61-82 National Bureau of Economic Research, Inc.
    4. David Cutler & Jonathan Gruber, 2001. "Health Policy in the Clinton Era: Once Bitten, Twice Shy," NBER Working Papers 8455, National Bureau of Economic Research, Inc.
    5. David M. Blau & Donna B. Gilleskie, 2001. "Retiree Health Insurance and the Labor Force Behavior of Older Men in the 1990s," The Review of Economics and Statistics, MIT Press, pages 64-80.
    6. Cameron, A. Colin & Gelbach, Jonah B. & Miller, Douglas L., 2011. "Robust Inference With Multiway Clustering," Journal of Business & Economic Statistics, American Statistical Association, vol. 29(2), pages 238-249.
    7. Eric French & John Bailey Jones, 2011. "The Effects of Health Insurance and Self‐Insurance on Retirement Behavior," Econometrica, Econometric Society, vol. 79(3), pages 693-732, May.
    8. Jonathan Gruber & Jeffrey Kubik, 2002. "Health Insurance Coverage and the Disability Insurance Application Decision," NBER Working Papers 9148, National Bureau of Economic Research, Inc.
    9. Kämpfen, Fabrice & Maurer, Jürgen, 2016. "Time to burn (calories)? The impact of retirement on physical activity among mature Americans," Journal of Health Economics, Elsevier, vol. 45(C), pages 91-102.
    10. Christine Jolls, 2007. "Employment Law and the Labor Market," NBER Working Papers 13230, National Bureau of Economic Research, Inc.
    11. Brigitte C. Madrian, 2005. "The U.S. health care system and labor markets," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, pages 137-163.
    12. John Rust & Christopher Phelan, 1997. "How Social Security and Medicare Affect Retirement Behavior in a World of Incomplete Markets," Econometrica, Econometric Society, vol. 65(4), pages 781-832, July.
    13. Gruber, Jonathan & Madrian, Brigitte C, 1995. "Health-Insurance Availability and the Retirement Decision," American Economic Review, American Economic Association, pages 938-948.
    14. David R. Weir & Robert J. Willis, 2003. "Widowhood, Divorce, and Loss of Health Insurance Among Near Elderly Women: Evidence from the Health and Retirement Study," Working Papers wp040, University of Michigan, Michigan Retirement Research Center.
    15. David M. Blau & Donna B. Gilleskie, 2008. "The Role Of Retiree Health Insurance In The Employment Behavior Of Older Men," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(2), pages 475-514, May.
    16. repec:eee:labchp:v:3:y:1999:i:pc:p:3309-3416 is not listed on IDEAS
    17. Zissimopoulos, Julie M. & Karoly, Lynn A., 2007. "Transitions to self-employment at older ages: The role of wealth, health, health insurance and other factors," Labour Economics, Elsevier, vol. 14(2), pages 269-295, April.
    18. Gruber, Jonathan & Madrian, Brigitte C, 1995. "Health-Insurance Availability and the Retirement Decision," American Economic Review, American Economic Association, pages 938-948.
    19. Genesove, David & Mayer, Christopher J, 1997. "Equity and Time to Sale in the Real Estate Market," American Economic Review, American Economic Association, pages 255-269.
    20. repec:eee:labchp:v:3:y:1999:i:pc:p:3261-3307 is not listed on IDEAS
    21. Alice Zawacki & Christine Eibner & Elaine Zimmerman, 2009. "Older Workers’ Access to Employer-Sponsored Retiree Health Insurance, 2000–2006," Journal of Labor Research, Springer, vol. 30(4), pages 350-364, December.
    22. Erin Strumpf, 2010. "Employer-sponsored health insurance for early retirees: impacts on retirement, health, and health care," International Journal of Health Economics and Management, Springer, pages 105-147.
    23. Jong, Robert & Herrera, Ana María, 2011. "Dynamic Censored Regression and the Open Market Desk Reaction Function," Journal of Business & Economic Statistics, American Statistical Association, pages 228-237.
    24. Kanika Kapur & Jeannette Rogowski, 2006. "Love or Money? Health Insurance and Retirement Among Married Couples," NBER Working Papers 12273, National Bureau of Economic Research, Inc.
    25. Andrew Samwick & David A. Wise, 2003. "Option Value Estimation with Health and Retirement Study Data," NBER Chapters,in: Labor Markets and Firm Benefit Policies in Japan and the United States, pages 205-228 National Bureau of Economic Research, Inc.

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