Health Insurance, Cost Expectations, and Adverse Job Turnover
In our theoretical model some firms do not offer health insurance to their employees because of large between-firm heterogeneity in expected employee health care costs. Because job turnover rates for healthier employees reduce by less than those for sicker employees when firms offer health insurance, expected health costs will increase when health insurance is offered. We call this adverse job turnover. State regulations on annual premium changes, and insurer reluctance to rapidly increase premiums mean that coverage is only offered to small firms at premiums above initial expected costs. The resulting separating equilibrium is one in which some firms face high initial premiums, choose not to offer insurance, and tolerate higher turnover rates than other firms the same industry that offer insurance. High administrative costs at small firms exacerbate selection. Using 1998-99 MEDSTAT MarketScan and 1997 Employer Health Insurance Survey data we find that expected employee health expenditures at firms offering insurance have lower within-firm and higher between-firm variance than at firms not offering insurance. Turnover rates are systematically higher in industries not offering insurance, and small firms have lower withinfirm variance but greater between-firm variance than large firms in their employee’s age and income distributions. These support our model.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||Jul 2007|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.bu.edu/econ/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Wiley Blackwell, vol. 38(114), pages 175-208, April.
- Ritva Immonen & Ravi Kanbur & Michael Keen & Matti Tuomala, 1994. "Tagging and taxing: the optimal use of categorical and income information in designing tax/transfer schemes," IFS Working Papers W94/05, Institute for Fiscal Studies.
- Boadway, R. & Marchand, M., .
"The use of public expenditures for redistributive purposes,"
CORE Discussion Papers RP
-1131, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Boadway, Robin & Marchand, Maurice, 1995. "The Use of Public Expenditures for Redistributive Purposes," Oxford Economic Papers, Oxford University Press, vol. 47(1), pages 45-59, January.
- Boadway, R. & Marchand, M., 1990. "The use of public expenditures for distributive purposes," CORE Discussion Papers 1990066, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Blackorby, Charles & Donaldson, David, 1988. "Cash versus Kind, Self-selection, and Efficient Transfers," American Economic Review, American Economic Association, vol. 78(4), pages 691-700, September.
- Ching-To Albert Ma & Michael H. Riordan, 2002.
"Health Insurance, Moral Hazard, and Managed Care,"
Journal of Economics & Management Strategy,
Wiley Blackwell, vol. 11(1), pages 81-107, 03.
- Arrow, Kenneth J, 1971. "A Utilitarian Approach to the Concept of Equality in Public Expenditure," The Quarterly Journal of Economics, MIT Press, vol. 85(3), pages 409-15, August.
- Immonen, Ritva, et al, 1998. "Tagging and Taxing: The Optimal Use of Categorical and Income Information in Designing Tax/Transfer Schemes," Economica, London School of Economics and Political Science, vol. 65(258), pages 179-92, May.
- Blackorby, Charles & Donaldson, David, 1994. "Information and Intergroup Transfers," American Economic Review, American Economic Association, vol. 84(2), pages 440-47, May.
When requesting a correction, please mention this item's handle: RePEc:bos:wpaper:wp2007-034. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gillian Gurish)
If references are entirely missing, you can add them using this form.