The Impact of Permanent Job Loss on Health Insurance Benefits

This paper investigates the impact of plant closings and permanent layoffs on the group health insurance coverage for a random sample of workers displaced from 1979-1988. Using data from the 198A, 1986 and 1988 CPS Displaced Worker Surveys and the March 1989 CPS, I find displaced workers that were re-employed at the time of the surveys were significantly less likely to have health insurance on their new job. For all married displaced workers I estimate the overall probability of HI coverage declined 19 percentage points from .88 to .69. The probability a married white male lost health insurance after displacement was .20. For single displaced workers the probability of health insurance coverage declined 25 percent from .64 to .48. Single white male workers that had HI benefits on their displaced job had a .38 probability of losing these benefits after displacement. Comparable effects were found for females. Less educated workers and minorities were more likely to lose coverage than white and college educated workers. I find no evidence that workers who lost health insurance benefits received higher wages on their new jobs to compensate for the loss. In fact, a displaced worker that lost health benefits suffered a greater wage loss than a comparable worker who gained health benefits.