Discussion Paper Series

Slade, Eric P., "An Analysis of the Consequences of Employer Linked Health Insurance Coverage in the United States." NLS Discussion Paper, Report: NLS 96-33

In the U.S. labor market it is commonplace to observe individuals for whom job changes have resulted in increases or decreases in health insurance coverage. Simple inspection of the job changes and changes in health insurance coverage experienced by individuals would reveal that individuals experience different types of job and health insurance coverage transitions.

The usual arrangement for health insurance coverage in the U.S. today links health insurance policies to employers. Recently, a few economists have suggested that this arrangement in inefficient, insofar as individuals pass up opportunities to work in preferred jobs due to a fear that their current level of health insurance coverage would be reduced in a new job (e.g. Madrian (1994) and Cooper and Monheit (1993) ). These authors term the inefficiency 'job-lock'; they conclude that employer-linked health insurance coverage does substantially reduce the frequency of job changes and that the negative effect of health insurance is strong for individuals with pre-existing medical conditions.

This paper analyzes the arguments and evidence presented in existing job-lock studies, and offers new evidence regarding the effect of health insurance coverage on job mobility. It begins with a lengthy critique of existing studies. The second part of the paper presents a new model of job changes and health insurance coverage. The final section reports the results of an empirical analysis based on data from the National Longitudinal Survey of Youth (NLSY).

Copies of this and other papers in this series are available from BLS by contacting Rita Jain at Jain.Rita@bls.gov or at (202) 691 - 7405.

Last Modified Date: July 09, 2003