Worker Sorting, Taxes and Health Insurance Coverage

Kevin Lang and Hong Kang ()
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Hong Kang: Department of Economics, Boston University

No WP2005-011, Boston University - Department of Economics - Working Papers Series from Boston University - Department of Economics

Abstract: We develop a model in which firms hire heterogeneous workers but must offer all workers insurance benefits under similar terms. In equilibrium, some firms offer free health insurance, some require an employee premium payment and some do not offer insurance. Making the employee contribution pre-tax lowers the cost to workers of a given employee premium and encourages more firms to charge. This increases the offer rate, lowers the take-up rate, increases (decreases) coverage among high (low) demand groups, with an indeterminate overall effect. We test the model using the expansion of section 125 plans between 1987 and 1996. The results are generally supportive.

Pages: 38 pages
Date: 2005-03
New Economics Papers: this item is included in nep-hea and nep-ias
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Related works:
Working Paper: Worker Sorting, Taxes and Health Insurance Coverage (2010)
Working Paper: Worker Sorting, Taxes and Health Insurance Coverage (2007)
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