Wage and Benefit Changes in Response to Rising Health Insurance Costs / Dana Goldman, Neeraj Sood, Arleen Leibowitz.

Format:

Book

Author/Creator:

Goldman, Dana P. (Dana Paul), 1966-

Contributor:

National Bureau of Economic Research.

Sood, Neeraj.

Leibowitz, Arleen A.

Series:

Working Paper Series (National Bureau of Economic Research) no. w11063.

NBER working paper series no. w11063

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2005.

Summary:

Many companies have defined-contribution benefit plans requiring employees to pay the full cost (before taxes) of more generous health insurance choices. Research has shown that employee decisions are quite responsive to these arrangements. What is less clear is how the total compensation package changes when health insurance premiums rise. This paper examines employee compensation decisions during a three-year period when health insurance premiums were rising rapidly. The data come from a single large firm with a flexible benefits plan wherein employees explicitly choose how to allocate compensation between cash wages and other benefits. Under such an arrangement, higher health insurance premiums must induce changes in the composition of total compensation -- either in lower after-tax wages or in decreased contributions to other benefits. The results suggest that about two-thirds of the premium increase is financed out of cash wages and the remaining one-thirds is financed by a reduction in benefits.

Notes:

Print version record

January 2005.