Subsidies to Employee Health Insurance Premiums and the Health Insurance Market / Jonathan Gruber, Ebonya Washington.

Format:

Book

Author/Creator:

Gruber, Jonathan.

Contributor:

National Bureau of Economic Research.

Washington, Ebonya.

Series:

Working Paper Series (National Bureau of Economic Research) no. w9567.

NBER working paper series no. w9567

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2003.

Summary:

One approach to covering the uninsured that is frequently advocated by policy makers is subsidizing the employee portion of employer-provided health insurance premiums. But, since the vast majority of those offered employer-provided health insurance already take it up, such an approach is only appealing if there is a very high takeup elasticity among those who are offered and uninsured. Moreover, if plan choice decisions are price elastic, then such subsidies can at the same time increase health care costs by inducing selection of more expensive plans. We study an excellent example of such subsidies: the introduction of pre-tax premiums for postal employees in 1994, and then for the remaining federal employees in 2000. We do so using a census of personnel records for all federal employees from 1991 through 2002. We find that there is a very small elasticity of insurance takeup with respect to its after-tax price, and a modest elasticity of plan choice. Our results suggest that the federal government did little to improve insurance coverage, but much to increase health care expenditures, through this policy change.

Notes:

Print version record

March 2003.