Health insurance, cost expectations, and adverse job turnover

Health Economics
Randall P Ellis, Ching-To Albert Ma

Abstract

Because less healthy employees value health insurance more than the healthy ones, when health insurance is newly offered job turnover rates for healthier employees decline less than turnover rates for the less healthy. We call this adverse job turnover, and it implies that a firm's expected health costs will increase when health insurance is first offered. Health insurance premiums may fail to adjust sufficiently fast because state regulations restrict annual premium changes, or insurers are reluctant to change premiums rapidly. Even with premiums set at the long run expected costs, some firms may be charged premiums higher than their current expected costs and choose not to offer insurance. High administrative costs at small firms exacerbate this dynamic selection problem. Using 1998-1999 MEDSTAT MarketScan and 1997 Employer Health Insurance Survey data, we find that expected employee health expenditures at firms that offer insurance have lower within-firm and higher between-firm variance than at firms that do not. Turnover rates are systematically higher in industries in which firms are less likely to offer insurance. Simulations of the offer decision capturing between-firm health-cost heterogeneity and expected turnover rate...Continue Reading

References

Feb 16, 2002·Journal of Health Economics·M Kate Bundorf
Apr 16, 2003·Journal of Policy Analysis and Management : [the Journal of the Association for Public Policy Analysis and Management]·K T StroupeJ J Kniesner
Aug 16, 2006·Journal of Health Economics·Randall P Ellis, Thomas G McGuire
Feb 12, 2008·Journal of Health Economics·Stephen MartinPeter C Smith
Nov 26, 2009·Health Economics·Mansour FarahaniDavid Canning

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Citations

Nov 29, 2013·International Journal of Environmental Research and Public Health·Randall P Ellis, Juan Gabriel Fernandez
Oct 18, 2018·Scandinavian Journal of Caring Sciences·Anders BremerIngela Thylén
Apr 12, 2013·Health Care Analysis : HCA : Journal of Health Philosophy and Policy·June Jones, Andrew Shanks
Feb 2, 2013·Forum for Health Economics & Policy·Jacob GlazerThomas G McGuire

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