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Interaction of the Labor Market and the Health Insurance System: Employer-Sponsored, Individual, and Public Insurance

Naoki Aizawa and Chao Fu

No 26713, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study regulations on the health insurance system for working-age U.S. households, consisting of employer-sponsored health insurance (ESHI), individual health insurance exchange (HIX), and Medicaid. We develop and estimate an equilibrium model with rich heterogeneity across local markets, households, and firms, which highlights the inter-relationship between various components of the health insurance system as well as their relationship with the labor market. We estimate the model exploiting variations across states and policy environments before and after the Affordable Care Act. In counterfactual experiments, we consider policies to cross subsidize between ESHI and HIX, which include pure risk pooling between the two markets as a special case. We find such policies would benefit most households, improve average household welfare, and decrease government expenditure. Furthermore, the welfare gains are larger if the cross subsidization is interacted with Medicaid expansion.

JEL-codes: I11 J01 (search for similar items in EconPapers)
Date: 2020-01
New Economics Papers: this item is included in nep-hea, nep-ias and nep-lab
Note: LS
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