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Employment and Adverse Selection in Health Insurance

Author

Listed:
  • Bhattacharya Jayanta

    (Center for Primary Care and Outcomes Research, Stanford Medical School, 117 Encina Commons, Stanford, CA 94305-6019, USA)

  • Vogt William B.

    (Department of Economics, University of Georgia, Terry College of Business, 513 Brooks Hall, Athens, GA 30602, USA)

Abstract

We construct and test a new model of employer-provided health insurance provision in the presence of adverse selection in the health insurance market. In our model, employers cannot observe the health of their employees, but can decide whether to offer insurance. Employees sort themselves among employers who do and do not offer insurance on the basis of their current health status and the probability distribution over future health status changes. We show that there a pooling equilibrium is more likely when the costs of switching jobs are high or when health status is not persistent. We test and verify some of the key implications of our model using data from the Current Population Survey, linked to information provided by the US Department of Labor about the job-specific human capital requirements of jobs.

Suggested Citation

  • Bhattacharya Jayanta & Vogt William B., 2014. "Employment and Adverse Selection in Health Insurance," Forum for Health Economics & Policy, De Gruyter, vol. 17(1), pages 79-104, January.
    • Handle: RePEc:bpj:fhecpo:v:17:y:2014:i:1:p:26:n:4
    DOI: 10.1515/fhep-2013-0017
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    References listed on IDEAS

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