Document sans titre
This brief seeks to answer
the question in the title by analyzing data from the Health and Retirement Study
(HRS), a nationally representative survey of older Americans. New questions
in the HRS enable researchers to compare the value that workers place on health
insurance with their perceptions about the cost of coverage.
The comparison of cost
with willingness-to-pay is important for two reasons. First, it helps us understand
why some workers and their families do not have health insurance. In one sense,
the reason is straightforward. The overwhelming majority — 85 percent
— of uninsured workers of all ages are either ineligible for coverage
that their employer provides or else work for an employer that does not offer
coverage.
This absence of employer-provided
coverage leaves them to seek health insurance on the individual market, where
both prices and denial rates are high. But the lack of coverage raises the question
of why some employers, but not others, offer health insurance.
One explanation is simply
that “good jobs” offer health insurance, and “bad jobs”
do not. However, economic theory suggests that this notion is too simplistic.
Employers will offer benefit packages to appeal to the types of employees they
wish to attract — subject to the constraints of minimum wage laws, anti-discrimination
regulations, and social norms. Employees will “pay” for this health
insurance in the form of a reduced cash wage.2 If employers believe that actual
and prospective employees value health insurance more highly than additional
cash, perhaps because of the preferential tax treatment and risk pooling obtained
at the employer level, they will offer insurance; otherwise, they will not.3
This does not mean that employees going without health insurance like their
situation — they simply prefer it to the alternative of a lower cash wage.
If this theory is correct, then the insured and the uninsured should differ
substantially in their willingness to pay for health insurance — a hypothesis
that we test using the HRS data.
The second reason to establish
how much workers value health insurance is that willingness to pay will influence
both the effectiveness and distributional consequences of strategies to increase
coverage. Some policy proposals and existing programs require individuals to
purchase health insurance, while providing subsidies targeted to low-income
households.4 Others offer such households subsidized insurance on a voluntary
basis.
Full
Paper (PDF)
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