Employment and Adverse Selection in Health Insurance

Jayanta Bhattacharya and William Vogt ()

No 12430, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We construct and test a new model of employer-provided health insurance provision in the presence of adverse selection in the health insurance market. In our model, employers cannot observe the health of their employees, but can decide whether to offer insurance. Employees sort themselves among employers who do and do not offer insurance on the basis of their current health status and the probability distribution over future health status changes. We show that there exists a pooling equilibrium in which both sick and healthy employees are covered as long as the costs of job switching are higher than the persistence of health status. We test and verify some of the key implications of our model using data from the Current Population Survey, linked to information provided by the U.S. Department of Labor about the job-specific human capital requirements of jobs.

JEL-codes: I1 J10 J33 (search for similar items in EconPapers)
Date: 2006-08
New Economics Papers: this item is included in nep-hea, nep-ias and nep-lab
Note: EH LS
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Citations: View citations in EconPapers (8)

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