Government Mandates and Employer-Based Health Insurance: Who Is Still Not Covered? (original) (raw)

Abstract

In this paper we explore the probability that employees have employer-based health insurance. Health insurance is a fixed cost which when added to cash compensation raises the cost of a low-wage worker more than that of a non-low-wage worker. A worker who has high expected medical expenditures or whose family has such expenditures may raise the cost of health insurance for all workers in the firm, particularly in a small firm. The minimum wage reduces an employer's ability to shift the cost of coverage to low-wage employees. These factors, along with a government subsidy that is more valuable to higher-income employees, lead to private-employer-based coverage that is highly correlated with wages. The nondiscrimination law attempts to change this pattern. We explore the resulting pattern of coverage and the effectiveness of the nondiscrimination law using national medical expenditure data from 1977 and 1987. Individual expected medical expenditures are estimated using a nonparametric approach; wages and premiums are also imputed and coverage itself is estimated using logit models over low-wage and non-low-wage samples separately for 1977 and 1987. Bootstrap methods test the robustness of our model.

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