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Essay on Health Insurance
Most individuals who have health insurance in the US obtain it through their employer. Some states either have or are considering government mandates that require employers to provide insurance to all full-time workers. We use experimental laboratory to investigate possible effects of alternative health insurance regulations on the labor market performance. Consistent with the theory, we find that mandating insurance for all workers creates labor market distortions; whereas mandating the insurance only for full-time workers leads to increased number of part-time workers but does not necessarily reduce efficiency.
Increasing health insurance coverage is arguably an important policy goal. Most individuals who have health insurance in the US obtain it through their employer. In 1999, 65.8% of non-elderly Americans had employerprovided insurance, also called group insurance, either through their own employer or through the employer of another household member (Gruber, 2001). Employer-provided insurance plans generally have lower premiums and offer more benefits than individual insurance plans. Health insurance providers can offer cheaper and better plans to company employees because the average administrative cost of such plans is lower than individual plans.Additionally, the provider can spread its risk of repayment among a group of buyers (Gruber, 2000). Some states either have or are considering government mandates that require employers to provide insurance to certain types of workers. The state of Hawaii requires employers to offer health insurance to all workers who work for more than 20 hours a week, and requires workers to have insurance.
The state of Maryland is currently considering a similar mandate. The effect of health insurance mandates on the labor market have also been discussed in the literature using theoretical and empirical methods. Summers (1989) suggests an efficiency argument for mandating employee benefits rather than providing insurance publicly. He shows that mandated benefits programs avoid the deadweight loss of public (tax-financed) provision.......
