Events at CERGE-EI

Jessica Min, B.A.

Princeton University, United States

Abstract: U.S. employer-sponsored health insurance costs have quadrupled over the past four decades, placing a significant burden on employers. This paper examines how these rising costs impact U.S. labor markets. I exploit local differences in exposure to national health insurer mergers between 1999 and 2019. Using new administrative data and a difference-indifferences research design, I estimate that insurer mergers account for 22 percent of the overall cost increase in the past two decades. Firms facing higher costs experience employment losses, concentrated among middle-income workers without a college education. I calculate an estimated loss of 5.2 percent for less-educated workers. While some workers reallocate between firms, aggregate employment declines within merger-exposed markets. The resulting increase in unemployment raises government spending on unemployment insurance by 15 percent. Compared to Canada, where health insurance is governmentfunded, U.S. workers without a college education have experienced 3 percentage points more job losses than their Canadian counterparts over the past two decades. Incorporating my findings into a labor market model, I show that rising health insurance costs explain 44 percent of this excess job loss.

Full Text: Causes and Consequences of Rising Employer-Sponsored Health Insurance Costs: Evidence from Insurer Mergers