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Health Insurance Costs and Early Retirement Decisions

Author

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  • Richard W. Johnson
  • Amy J. Davidoff
  • Kevin Perese

Abstract

The loss of health insurance may be an important component of the cost of retirement, especially for workers without retiree health insurance coverage. The authors find that insurance costs significantly reduce retirement rates for full-time wage and salary workers ages 51 to 61. Simulations suggest that a $1,000 increase in the net present value of health insurance premium costs reduces the probability of early retirement by 0.17 percentage points for men and by 0.24 percentage points for women, corresponding to elasticities of −0.22 and −0.24, respectively. The authors' models predict that expanding the Medicare program to cover those aged 62–64 would increase retirement rates for workers with employer-sponsored coverage who lack retiree benefits, if the government subsidizes their coverage. However, the impact would be small, increasing overall retirement rates by only 7%.

Suggested Citation

  • Richard W. Johnson & Amy J. Davidoff & Kevin Perese, 2003. "Health Insurance Costs and Early Retirement Decisions," ILR Review, Cornell University, ILR School, vol. 56(4), pages 716-729, July.
    • Handle: RePEc:sae:ilrrev:v:56:y:2003:i:4:p:716-729
    DOI: 10.1177/001979390305600410
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    References listed on IDEAS

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    1. Alan L. Gustman & Thomas L. Steinmeier, 1991. "Changing the Social Security Rules for Work after 65," ILR Review, Cornell University, ILR School, vol. 44(4), pages 733-745, July.
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    Citations

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    Cited by:

    1. Robert W. Fairlie & Kanika Kapur & Susan Gates, 2016. "Job Lock: Evidence from a Regression Discontinuity Design," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 55(1), pages 92-121, January.
    2. James Marton & Stephen A. Woodbury & Barbara Wolfe, 2007. "Retiree Health Benefit Coverage and Retirement," Palgrave Macmillan Books, in: Dimitri B. Papadimitriou (ed.), Government Spending on the Elderly, chapter 9, pages 220-246, Palgrave Macmillan.
    3. Barbara A Butrica & Karen Elizabeth Smith & C. Eugene Steuerle, 2006. "Working for a Good Retirement," Working Papers, Center for Retirement Research at Boston College wp2006-8, Center for Retirement Research, revised May 2006.
    4. Helen Levy & Thomas Buchmueller & Sayeh Nikpay, 2015. "The Effect of Health Reform on Retirement," Working Papers wp329, University of Michigan, Michigan Retirement Research Center.
    5. Helen Levy & Thomas Buchmueller & Sayeh Nikpay, 2018. "Is the Affordable Care Act Affecting Retirement Yet?," Working Papers wp393, University of Michigan, Michigan Retirement Research Center.
    6. Brigitte C. Madrian, 2005. "The U.S. health care system and labor markets," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 50(Jun), pages 137-163.
    7. Richard W. Johnson, 2007. "What Happens to Health Benefits after Retirement?," Work Opportunity Briefs wob_7, Center for Retirement Research, revised Feb 2007.
    8. Brown, Kristine M., 2013. "The link between pensions and retirement timing: Lessons from California teachers," Journal of Public Economics, Elsevier, vol. 98(C), pages 1-14.
    9. Butrica, Barbara A. & Johnson, Richard W. & Smith, Karen E. & Steuerle, C. Eugene, 2006. "The Implicit Tax on Work at Older Ages," National Tax Journal, National Tax Association;National Tax Journal, vol. 59(2), pages 211-234, June.
    10. Boyle, Melissa A. & Lahey, Joanna N., 2010. "Health insurance and the labor supply decisions of older workers: Evidence from a U.S. Department of Veterans Affairs expansion," Journal of Public Economics, Elsevier, vol. 94(7-8), pages 467-478, August.
    11. Richard W. Johnson, 2004. "How Closely Do Spouses Coordinate Thier Retirement Decisions?," Others 0408006, University Library of Munich, Germany.
    12. Joshua Congdon-Hohman, 2006. "The Impact of Health Insurance Availability on Retirement Decision Reversals," Working Papers wp137, University of Michigan, Michigan Retirement Research Center.
    13. Gordon B.T. Mermin & Richard W. Johnson & Dan Murphy, 2006. "Why Do Boomers Plan to Work So Long?," Working Papers, Center for Retirement Research at Boston College wp2006-19, Center for Retirement Research, revised Nov 2006.

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