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Worker Sorting, Taxes and Health Insurance Coverage

Author Info

  • Kevin Lang

    ()

    (Boston University and NBER and IZA)

Abstract

If firms hire heterogeneous workers but must offer all workers insurance bene?fits under similar terms, then in equilibrium, some firms offer free health insurance, some require an employee premium payment and some do not offer insurance. Making the employee contribution pre-tax lowers the cost to workers of a given employee premium and encourages more firms to charge. This increases the offer rate, lowers the take-up rate, increases (decreases) coverage among high (low) demand groups, with an indeterminate overall effect. This pattern is consistent with trends in the U.S. economy following the creation of section 125 plans.

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Paper provided by Boston University - Department of Economics in its series Boston University - Department of Economics - Working Papers Series with number WP2010-015.

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Length: 39 pages
Date of creation: Jan 2010
Date of revision:
Handle: RePEc:bos:wpaper:wp2010-015
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Find related papers by JEL classification:
  • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
  • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
  • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
  • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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  1. Kevin Lang & Sumon Majumdar, 2003. "The Pricing of Job Characteristics When Markets Do Not Clear: Theory and Implications," NBER Working Papers 9911, National Bureau of Economic Research, Inc.
  2. Jaeger, David A, 1997. "Reconciling the Old and New Census Bureau Education Questions: Recommendations for Researchers," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(3), pages 300-309, July.
  3. Gruber, Jonathan & Washington, Ebonya, 2005. "Subsidies to employee health insurance premiums and the health insurance market," Journal of Health Economics, Elsevier, vol. 24(2), pages 253-276, March.
  4. Matthew S. Dey & Christopher J. Flinn, 2005. "An Equilibrium Model of Health Insurance Provision and Wage Determination," Econometrica, Econometric Society, vol. 73(2), pages 571-627, 03.
  5. Helen Levy, 1998. "Who Pays for Health Insurance? Employee Contributions to Health Insurance Premiums," Working Papers 777, Princeton University, Department of Economics, Industrial Relations Section..
  6. Farber, Henry S. & Levy, Helen, 2000. "Recent trends in employer-sponsored health insurance coverage: are bad jobs getting worse?," Journal of Health Economics, Elsevier, vol. 19(1), pages 93-119, January.
  7. Gruber, Jonathan & McKnight, Robin, 2003. "Why did employee health insurance contributions rise?," Journal of Health Economics, Elsevier, vol. 22(6), pages 1085-1104, November.
  8. Kahn, Shulamit & Lang, Kevin, 1988. "Efficient Estimation of Structural Hedonic Systems," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(1), pages 157-66, February.
  9. Martha Starr-McCluer, 1994. "Health insurance and precautionary saving," Finance and Economics Discussion Series 94-10, Board of Governors of the Federal Reserve System (U.S.).
  10. Pauly, Mark V, 1986. "Taxation, Health Insurance, and Market Failure in the Medical Economy," Journal of Economic Literature, American Economic Association, vol. 24(2), pages 629-75, June.
  11. Dranove, David & Spier, Kathryn E. & Baker, Laurence, 2000. "'Competition' among employers offering health insurance," Journal of Health Economics, Elsevier, vol. 19(1), pages 121-140, January.
  12. Jonathan Gruber & Ebonya Washington, 2003. "Subsidies to Employee Health Insurance Premiums and the Health Insurance Market," NBER Working Papers 9567, National Bureau of Economic Research, Inc.
  13. Dougherty, C R S, 1972. "Estimates of Labor Aggregation Functions," Journal of Political Economy, University of Chicago Press, vol. 80(6), pages 1101-19, Nov.-Dec..
  14. Miller, Nolan H., 2005. "Pricing health benefits: A cost-minimization approach," Journal of Health Economics, Elsevier, vol. 24(5), pages 931-949, September.
  15. Charles Brown, 1980. "Equalizing Differences in the Labor Market," The Quarterly Journal of Economics, Oxford University Press, vol. 94(1), pages 113-134.
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