Presenter:

Zhehui Luo

Authors:

Cathy Bradley, David Neumark, Zhehui Luo, Heather Bednarek

Chair: Timothy McBride; Discussant: TBA Wed June 7, 2006 9:45-11:15 Room 235

For the majority of non-elderly Americans, health insurance is either contingent upon their own employment or dependent upon the employment of a family member such as a spouse or parent. Past research has examined the labor supply behavior of individuals who have employment-contingent health insurance and of individuals dependent upon another’s policy. The effects of health on labor supply have also been studied. Absent from this literature, however, is an assessment of how the two-health and employment-contingent health insurance-interact to alter labor supply after an adverse health shock is experienced by an otherwise healthy employed individual. Such information would help policy makers understand some of the incentives and possible pitfalls of employment-contingent health insurance following illness. Women newly diagnosed with breast cancer were identified, shortly after diagnosis, from the Metropolitan Detroit Cancer Surveillance System (MDCSS), a population-based registry. Study eligibility criteria were age range of 30 to 64, English-speaking, and either employed or with an employed spouse at the time of diagnosis. We selected from this sample only women who were married and who were employed in the period just before diagnosis with cancer, and who were either insured through their own employer or through their spouse’s employer. Our empirical analysis of health, health insurance, and labor supply led to a clear finding that a negative health shock, as reflected in a diagnosis of breast cancer, decreases labor supply to a greater extent among women insured by their spouse’s health insurance policy than among women with health insurance through their employer. Moreover, the difference in responses associated with source of health insurance is greater for women with advanced-stage diseases-suggesting that even women who required aggressive treatment were sensitive to employment-contingent health insurance (ECHI) in making their labor supply decisions in the post-diagnosis period. We assessed whether women with ECHI were more attached to their jobs or had more desirable jobs. What we see is that there are only small and insignificant differences between those with insurance through the spouse, who were or were not offered ECHI. These results suggest, again, that the key difference is whether or not health insurance is contingent on employment, rather than job characteristics that might be associated with ECHI. The evidence from this analysis provided additional confidence in a causal interpretation of the findings rather than one attributable to selection. Employment-contingent insurance appears to be an incentive to remain working and to work at a greater intensity when faced with an adverse health shock. To our knowledge, this is the first study to prospectively and longitudinally examine how the labor supply responses of individuals experiencing a health shock depend on the source of health insurance. The findings underscore the labor supply incentives posed by ECHI. There may be potential benefits to employers from creating an incentive for employees to remain working after a health shock. However, the principal effect may be a health toll on individuals who remain working because of the incentives posed by their health insurance.