Does non-employment based health insurance promote entrepreneurship? Evidence from a policy experiment in China

Previous researchers have shown that employment-based health insurance lowers job mobility and deters entrepreneurship. The Urban Resident Basic Medical Insurance (URBMI) program, piloted in 2007 in China and fully established in 2009, offers health insurance to about 271 million urban residents without formal employment. Before the implementation of URBMI, most urban residents obtained health insurance through their employers, and therefore a large number of unemployed and self-employed individuals were uninsured. Thus, URBMI creates a new insurance option that does not depend on formal employment and may promote entrepreneurship. We take advantage of this policy change to evaluate the effect of URBMI on self-employment. Using 2000–2011 data from the China Health and Nutrition Survey and a difference-in-differences approach with propensity score weighting, we found that URBMI increased self-employment rate by at least 8.73% for the overall population. The result was mainly driven by the URBMI’s impact on unhealthy workers, individuals with 12 years of schooling or less, and workers above 30 years old.     

Does health insurance matter? Evidence from China’s urban resident basic medical insurance

In 2007, China launched a subsidized voluntary public health insurance program, the Urban Resident Basic Medical Insurance (URBMI), for urban residents without formal employment. We estimate the impact of the URBMI on health care utilization and expenditure by a fixed effects approach with instrumental variable correction, using the 2006 and 2009 waves of the China Health and Nutrition Survey. We explore the time variation of program implementation at the city level as the instrument for individual enrollment. We find that this program has significantly increased the utilization of formal medical services, including both outpatient care and inpatient care, but it has not reduced total out-of-pocket health expense. We also find that this program has improved medical care utilization more for children, members of the low-income families, and the residents in the relatively poor western region.     

Adverse selection in health insurance markets? Evidence from state small-group health insurance reforms

The past decade witnessed major changes in state laws governing the sale of health insurance to small employers. States took measures to restrict insurers' ability to distinguish between high and low-risk customers because of concern about the low rate of coverage among workers in small firms, the high prices in the small-group market and the absence of federal health reform. Using both individual-level and employer-level data, I test predictions about the effect of reforms on the employer-provided health insurance market. I estimate these effects for small firms and their workers using large firms and their workers in the same states, as well as large and small firms and their workers in non-reform states, as comparison groups. I find the reforms decreased the rate of employer coverage on average for workers in small firms by less than two percentage points. Within small firms, low-expenditure individuals experienced a larger decline in the rate of coverage through their employer, while the coverage rate of high-expenditure individuals rose slightly in some specifications. There is also evidence that comprehensive reforms increased premiums slightly for small employers, and that most of this increase was passed on to workers through higher employee contributions.     

The impact of health insurance on job location choice: Evidence from rural China

Many health insurance programs contain certain portability constraints. It is common that enrollees are eligible for greater reimbursement when they received services at selected local facilities. We investigate the impact of this portability constraint on residents' choice of job location. Using a unique, nationwide survey data set in China, we find that provision of health insurance decreases the probability of working in non-local regions for the rural residents by 2.4%. The results are mainly driven by the residence lock-in effect. That is, the insurance program discourages rural residents from working outside their registered areas of residence and, especially, in other provinces. The pullback effect, that is, the effect of the health insurance program attracting migrant workers who had worked outside back to regions close to their hometowns, is not found to be significant.     

Integration of unemployment insurance with retirement insurance

This paper analyzes a social insurance system that integrates unemployment insurance with a pension program, allowing workers to borrow against their future wage income to finance consumption during an unemployment episode and thus improving search incentives while reducing the risks arising from unemployment. This paper identifies the conditions under which integration improves welfare and the factors which determine the optimal degree of integration. We show that when the duration of unemployment is very short compared to the period of employment or retirement, the optimal system involves exclusive reliance on pension-funded self-insurance. This system imposes a negligible risk burden for workers while avoiding attenuating search incentives. We also argue that joint integration of several social insurance programs with a pension program through an individual account is desirable unless the risks are perfectly correlated with each other.     

The micro-firm health insurance hypothesis

The objective of this study is to investigate the ‘micro-firm health insurance hypothesis’, a hypothesis that the greater the percentage of domestic firms that are ‘very small’, i.e. have four or fewer employees, the greater the percentage of the US population that will be without health insurance. The focus of this study is based on the premise that very small firms (as defined), ‘micro-firms’, which constitute 58.6% of all private sector firms in the US, face bargaining-power, financial, and competitive constraints that tend to limit their ability to provide group health insurance benefits to their employees, with the result being that employees at very small firms are relatively more likely than employees at larger firms to be without a health insurance fringe benefit. Weighted Least Squares (WLS) estimates provide strong empirical support for the hypothesis.     

城镇基本医疗保险中逆向选择的检验

本文利用城镇居民基本医疗保险试点评估调查的数据,实证检验了我国城镇居民和职工基本医疗保险中的逆向选择问题。本文的实证结果证实了逆向选择的存在:在未被城镇职工基本医疗保险覆盖的城镇人群中,健康状况较差的个体更倾向于参加城镇居民基本医疗;城镇居民基本医疗保险的参保者接受门诊和住院服务利用率的概率更高;保险对住院服务利用率的影响大于对门诊的影响。另一方面,我们还发现在已被城镇职工基本医疗保险覆盖的人群中,健康状况较差的职工也更倾向于购买补充商业医保,但是健康状况最差的个体购买补充商业医保的概率最低,而购买商业医保后住院率显著增加。     

Flexible Labor Regulations and Informality in Egypt

Do more flexible labor market regulations reduce informal employment in formal firms? This paper examines the effects of changes in labor regulations on the incidence of formal employment. Using the case of Egypt, we study the effects of the introduction of more flexible labor regulations in 2003 on the probability that non‐contractual workers will be granted a formal employment contract. To identify the effect of the law and control for potential confounding factors, we use a difference‐in‐difference estimator that measures the difference in the pre‐ and post‐law probability of obtaining a formal contract across a treatment group of non‐contractual workers initially employed in formal firms and a comparison group of non‐contractual workers initially employed in informal firms. The latter serve as a useful comparison group since informal firms are unlikely to formalize as a result of the law, so that the only way their workers can become formal is to move to another firm. Our findings show that the passage of the new labor law did in fact increase the probability of transitioning to formal employment for non‐contractual workers employed in formal firms by about 3–3.5 percentage points, or the equivalent of at least a fifth of informal workers in formal firms.     

Health insurance and the labor supply decisions of older workers: Evidence from a U.S. Department of Veterans Affairs expansion

This paper exploits a major mid-1990s expansion in the U.S. Department of Veterans Affairs health care system to provide evidence on the labor market effects of expanding health insurance availability. Using data from the Current Population Survey, we employ a difference-in-differences strategy to compare the labor market behavior of older veterans and non-veterans before and after the VA health benefits expansion to test the impact of public health insurance on labor supply. We find that older workers are significantly more likely to decrease work both on the extensive and intensive margins after receiving access to non-employer based insurance. Workers with some college education or a college degree are more likely to transition into self-employment, a result consistent with “job-lock” effects. However, less-educated workers are more likely to leave self-employment, a result suggesting that the positive income effect from receiving public insurance dominates the “job-lock” effect for these workers. Some relatively disadvantaged sub-populations may also increase their labor supply after gaining greater access to public insurance, consistent with complementary positive health effects of health care access or decreased work disincentives for these groups. We conclude that this reform has affected employment and retirement decisions, and suggest that future moves toward universal coverage or expansions of Medicare are likely to have significant labor market effects.     

Small firms,bigger changes: health insurance coverage take-up rates in small firms after the ACA

Measuring the impact of the Affordable Care Act of 2010 (ACA) on employer-sponsored health insurance is essential in an era of constant changes to health policy. Using data from the Kaiser Family Foundation Employer Survey, we focus on firms with fewer than 50 employees in order to isolate the effect of the ACA on small firms. We utilize a differences‐in‐differences approach with a time fixed effect structure to provide analysis for a treatment group of small firms and a control group of large firms. After excluding firms with grandfathered plans, we find that the ACA provisions reduced health insurance coverage take-up rates in small firms by 1.96 to 2.67 percentage points (compared to large firms).     

中国城镇医疗体制改革前后的医疗融资比较

The health financing schemes is the foundation for the nation’s health care system, and the health insurance is a main one of some options for financing health care. This article compares two health care financing schemes in urban areas before and after the health reform, and targets at the impacts facing coverage groups, the financing methods, decision-making power or financial management (i.e. the distribution of responsibility and rights between the central government and local governments), payment arrangement and cost containment of health care financing mechanisms. Prior to reform, the equal access and universal coverage of health care services were implemented through the employment-based health insurance in a state-controlled economy with guaranteed full employment and central control in general. The decentralization reforms of fiscal system and tax sharing reforms disrupts the past economic foundation, the rebuilding health insurance system which still benefits the employed bring the limited coverage. The next trend is to make transition from health insurance covering only part of the employed population to what are in effect national health services covering the whole population in urban areas.      

State mandated benefits and the small firm's decision to offer insurance

In the last decade, the number of Americans without health insurance has grown, partly due to an erosion in employer-based coverage among workers. This paper examines the extent to which state-mandated benefit requirements and other state insurance regulations discourage small firms in the private sector from providing health benefits. Using data on 1320 firms observed in 1985 and 492 firms observed in 1988, we estimate two models of small firms' decisions to offer health insurance (one for each data set), and then use them to assess the effects that mandates had on purchasing decisions in both years. We estimate that 19 percent of noncoverage among sample businesses in 1985 and 43 percent of noncoverage in the 1988 sample was attributable to state-mandated benefits. State continuation-of-coverage requirements were particularly burdensome for firms. With continued growth in the number of state mandated benefit requirements, we should expect a steady rise in the small firm's propensity to forgo insurance coverage.     

Effects of health insurance on labour supply: evidence from the health care fund for the poor in Vietnam

The expansion of health insurance in emerging countries raises concerns about the unintended negative effects of health insurance on labour supply. This article examines the labour supply effects of the Health Care Fund for the Poor (HCFP) in Vietnam in terms of the number of work hours per month and labour force participation (the probability of employment). Employing various matching methods combined with a Difference-in-Differences approach on the Vietnam Household Living Standard Surveys 2002–2006, we show that the HCFP, which aims to provide poor people and disadvantaged minority groups with free health insurance, has a negative effect on labour supply. This is manifested in both the average number of hours worked per month and the probability of employment, suggesting the income effect of the HCFP. Interestingly, the effects are mainly driven by the non-poor recipients living in rural areas, raising the question of the targeting strategy of the programme.     

Health insurance and precautionary saving: A structural analysis

Starr-McCluer (1996) documented an empirical finding showing that US households covered by health insurance saved more than those without coverage, which is inconsistent with the standard consumption–saving theory. This study conducts a structural analysis and suggests that institutional factors, particularly, a social insurance or safety net system and an employment-based health insurance system, can account for this puzzling finding. A dynamic equilibrium model is built that combines these two institutions with heterogeneous agents making endogenous decisions regarding saving, the labor supply and health insurance when they are young. The model, in which agents save in a precautionary manner, can generate Starr-McCluer?s empirical finding. The result implies that Starr-McCluer?s results are not inconsistent with the standard theory of saving under uncertainty, but it does indicate that the standard saving regression model is unable to reveal the precautionary saving motive. Counterfactual experiments are performed to provide implications for empirical analyses.     

The Macroeconomic Consequences of Financing Health Insurance

Employer-financed health insurance systems like those used in the United States distort firms’ labor demand and adversely affect the economy. Since such costs vary with employment rather than hours worked, firms have an incentive to increase output by increasing worker hours rather than employment. Given that the returns to employment exceed the returns to hours worked, this results in lower levels of employment and output. In this paper, we construct a heterogeneous agent general equilibrium model where individuals differ with respect to their productivity and employment opportunities. Calibrating the model to the U.S. economy, we generate steady state results for several alternative models for financing health insurance: one in which health insurance is financed primarily through employer contributions that vary with employment, a second where insurance is funded through a non-distortionary, lump-sum tax, and a third where insurance is funded by a payroll tax. We measure the effects of each of the alternatives on output, employment, hours worked, and wages.     

Health insurance and labor market outcomes: Joint decision-making within households

Most Americans obtain access to health insurance through an employer. In this paper, we ask how the link between health insurance and employment affects labor market choices such as whether to work full-time. To understand the effect of the incentives embedded in the employer-based insurance system, we study the joint decision-making of husbands and wives that determines the household's access to health insurance. We estimate the effect on a wife's (husband's) labor market outcomes of husband's (wife's) health insurance, allowing the health insurance of both spouses to be endogenous. Obtaining unbiased estimates of such effects is complicated by the likelihood that positive assortative mating creates correlations between a couple's characteristics and the possibility that there are important unobservable household income effects. Our innovation is to measure these biases by examining a second fringe benefit, paid sick leave, in addition to health insurance. We find that, as predicted, spouse's insurance has statistically significant negative effects on being offered own employer insurance as well as on the probability of working full-time with health insurance.     

Price dispersion in the private health insurance industry: The case of Catalonia

This paper presents a vertical and horizontal product differentiation model that explains price dispersion among different kinds of health care insurance firms. Our model shows large insurance firms engaging in price competition with small mutual organizations that serve only a local area and charge lower premiums. We found that, although the market allows the entry of an excessive number of firms, the presence of local insurance companies increases social welfare by increasing the range of products available to consumers. Our conclusions are applicable to OECD countries in general although we rely on Catalonia's data.     

Health insurance market reform and employee compensation: The case of pure community rating in New York

Pure community rating, which was enacted to improve access to health insurance in New York's small group market in 1993, prevents carriers from charging different premiums based on the ages of a firm's workers. If small firms were adjusting compensation packages prior to reform to offset higher health care costs of older workers, then community rating could lead to greater relative wages for older workers post reform and not necessarily induce adverse selection that results in changes in who is insured. I present evidence showing that relative wages of older workers in small firms increased in comparison with other states and with large firms within New York following reform.     

Two separated effects of employer-provided health insurance on job mobility

We estimate the effect of employer-provided health insurance (EPHI) on job mobility via a dynamic model of joint employment and health insurance decision in the presence of uncertainty about wage rate and health status transitions. The model is based on a Markov decision process in which a hedonic wage approach provides an economic rationale for the different choices and health insurance serves as an input to the health production process. Including health transitions in the model helps us to understand how the availability of EPHI (positive job characteristic) and holding EPHI (the wage-health insurance trade-off) enter into the individuals’ decisions. The model is estimated using the 1999–2000 Medical Expenditure Panel Survey panel 4, and the results show that the ‘pure’ effects of holding EPHI are negligible, the ‘full’ effects of EPHI are significant and the degrees of the inefficiency vary between 14% and 25% across different states.     

Temporary Layoffs and Unemployment Insurance: Is Experience Rating Desirable?

Abstract. This paper explores how the introduction of an experience-rated system of unemployment insurance affects employment and welfare in a model where implicit contracts between firms and workers give rise to wage rigidities and unemployment. In the literature, it has been argued that experience-rated systems of unemployment insurance may reduce long-term employment as firms anticipate the higher costs of layoffs implied by experience rating. Our analysis shows that the introduction of experience rating may increase or decrease long-term employment but it unambiguously raises welfare.