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

  • Jonathan Gruber
  • Brigitte Madrian

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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File URL: http://www.nber.org/papers/w4594.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4594.

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Date of creation: Dec 1993
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Publication status: published as Gruber, Jonathan and Brigitte C. Madrian. "Health-Insurance Availability And The Retirement Decision," American Economic Review, 1995, v85(4), 938-948.
Handle: RePEc:nbr:nberwo:4594
Note: HC
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  1. Jonathan Gruber & Brigitte C. Madrian, 1993. "Health Insurance Availability and the Retirement Decision," NBER Working Papers 4469, National Bureau of Economic Research, Inc.
  2. Louis S. Jacobson & Robert J. LaLonde & Daniel Sullivan, 1992. "Earnings Losses of Displaced Workers," Upjohn Working Papers and Journal Articles 92-11, W.E. Upjohn Institute for Employment Research.
  3. 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.
  4. Robin L. Lumsdaine & James H. Stock & David A. Wise, 1990. "Three Models of Retirement: Computational Complexity Versus Predictive Validity," NBER Working Papers 3558, National Bureau of Economic Research, Inc.
  5. 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.
  6. James H. Stock & David A. Wise, 1988. "Pensions, The Option Value of Work, and Retirement," NBER Working Papers 2686, National Bureau of Economic Research, Inc.
  7. Burtless, Gary, 1986. "Social Security, Unanticipated Benefit Increases, and the Timing of Retirement," Review of Economic Studies, Wiley Blackwell, vol. 53(5), pages 781-805, October.
  8. 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.
  9. Gruber, J., 1992. "State Mandated Benefits and Employer Provided Health Insurance," Working papers 92-18, Massachusetts Institute of Technology (MIT), Department of Economics.
  10. James H. Stock & David A. Wise, 1988. "The Pension Inducement to Retire: An Option Value Analysis," NBER Working Papers 2660, National Bureau of Economic Research, Inc.
  11. Bound, John & Waidmann, Timothy, 1992. "Disability Transfers, Self-Reported Health, and the Labor Force Attachment of Older Men: Evidence from the Historical Record," The Quarterly Journal of Economics, MIT Press, vol. 107(4), pages 1393-419, November.
  12. 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.
  13. Alan L. Gustman & Thomas L. Steinmeier, 1993. "Employer Provided Health Insurance and Retirement Behavior," NBER Working Papers 4307, National Bureau of Economic Research, Inc.
  14. Hurd, Michael D, 1990. "Research on the Elderly: Economic Status, Retirement, and Consumption and Saving," Journal of Economic Literature, American Economic Association, vol. 28(2), pages 565-637, June.
  15. 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.
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