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Where do the sick go? Health insurance and employment in small and large firms

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Author(s)
Kapur, Kanika 
Escarce, José J. 
Marquis, M. Susan 
Simon, Kosali I. 
Uri
http://hdl.handle.net/10197/952
Date Issued
November 2006
Date Available
11T15:01:59Z March 2009
Abstract
Small firms that offer health insurance to their employees may face variable premiums if the firm hires an employee with high-expected health costs. To avoid expensive premium variability, a small firm may attempt to maintain a workforce with low-expected health costs. In addition, workers with high-expected health costs may prefer employment in larger firms with health insurance rather than in smaller firms. This results in employment distortions. We examine the magnitude of these employment distortions in hiring, employment, and separations, using the Medical Expenditure Panel Survey from 1996 to 2001. Furthermore, we examine the effect of state small group health insurance reforms that restrict insurers’ ability to deny coverage and restrict premium variability on employment distortions in small firms relative to large firms. We find that workers with high-expected health cost are less likely to be new hires in small firms that offer health insurance, and are less likely to be employed in insured small firms. However, we find no evidence that state small group health insurance reforms have reduced the extent of these distortions. Estimating the magnitude of employment distortions in insured small firms is essential in refining reforms to the small group health insurance market.
Type of Material
Working Paper
Publisher
University College Dublin. School of Economics
Series
UCD Centre for Economic Research Working Paper Series
WP06/13
Copyright (Published Version)
UCD School of Economics 2006
Classification
J21
J63
I10
I18
Subject – LCSH
Employer-sponsored health insurance
Insurance, Health--Premiums
Small business--Costs
Web versions
http://www.ucd.ie/economics/research/papers/2006/WP06.13.pdf
Language
English
Status of Item
Not peer reviewed
This item is made available under a Creative Commons License
https://creativecommons.org/licenses/by-nc-sa/1.0/
Owning collection
Economics Working Papers & Policy Papers
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