IDEAS home Printed from https://ideas.repec.org/a/sae/pubfin/v41y2013i1p3-36.html
   My bibliography  Save this article

Employer-Provided Health Insurance and the Adverse Selection Problem

Author

Listed:
  • Marco A. Castaneda
  • James Marton

Abstract

The role of employers in the health insurance market in the United States is substantial, but there is little formal analysis investigating how the introduction of employers affects the structure of equilibrium contracts in the health insurance market. In this article, the authors present and analyze a model of employer-provided health insurance and show that if the labor market is competitive, the equilibrium must be a separating equilibrium, as in the standard model. The key to this result is that insurance companies and employers have similar incentives because health insurance is an important component of total compensation. In addition, the authors show that if workers bargain collectively for employment contracts, the equilibrium can be a separating or a pooling equilibrium, but in any equilibrium, the low risks obtain more insurance than in the standard model and subsidize the insurance premiums of the high risks.

Suggested Citation

  • Marco A. Castaneda & James Marton, 2013. "Employer-Provided Health Insurance and the Adverse Selection Problem," Public Finance Review, , vol. 41(1), pages 3-36, January.
    • Handle: RePEc:sae:pubfin:v:41:y:2013:i:1:p:3-36
    DOI: 10.1177/1091142111434594
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/1091142111434594
    Download Restriction: no
    File URL: https://libkey.io/10.1177/1091142111434594?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Melissa A. Thomasson, 2003. "The Importance of Group Coverage: How Tax Policy Shaped U.S. Health Insurance," American Economic Review, American Economic Association, vol. 93(4), pages 1373-1384, September.
    2. Thomas C. Buchmueller & John Dinardo & Robert G. Valletta, 2002. "Union Effects on Health Insurance Provision and Coverage in the United States," ILR Review, Cornell University, ILR School, vol. 55(4), pages 610-627, July.
    3. Jack, William, 2002. "Equilibrium in competitive insurance markets with ex ante adverse selection and ex post moral hazard," Journal of Public Economics, Elsevier, vol. 84(2), pages 251-278, May.
    4. Feldman, Roger & Dowd, Bryan, 2000. "Risk segmentation: goal or problem?," Journal of Health Economics, Elsevier, vol. 19(4), pages 499-512, July.
    5. Crocker, Keith J. & Snow, Arthur, 1985. "The efficiency of competitive equilibria in insurance markets with asymmetric information," Journal of Public Economics, Elsevier, vol. 26(2), pages 207-219, March.
    6. Jayanta Bhattacharya & William B. Vogt, 2006. "Employment and Adverse Selection in Health Insurance," NBER Working Papers 12430, National Bureau of Economic Research, Inc.
    7. Chernew, Michael E. & Frick, Kevin D., 1999. "The impact of managed care on the existence of equilibrium in health insurance markets," Journal of Health Economics, Elsevier, vol. 18(5), pages 571-590, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ines Läufer, 2014. "Das Krankenversicherungssystem in den USA: Bestimmungsparameter des Angebots und der Ausgestaltungformen von Arbeitgeber-Gruppenversicherungen," Otto-Wolff-Institut Discussion Paper Series 03/2014, Otto-Wolff-Institut für Wirtschaftsordnung, Köln, Deutschland.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. M. Kate Bundorf, 2010. "The Effects of Offering Health Plan Choice Within Employment‐Based Purchasing Groups," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 77(1), pages 105-127, March.
    2. Xinyan Shi & Lydia Gan, 2023. "Equilibrium in Competitive Insurance Markets with Medical Tourism," Studies in Microeconomics, , vol. 11(2), pages 246-269, August.
    3. M. Kate Bundorf, 2003. "The Effects of Offering Health Plan Choice within Employment-Based Purchasing Groups," NBER Working Papers 9996, National Bureau of Economic Research, Inc.
    4. Innes, Robert, 1987. "Adverse Selection And Tax Externalities In A Model Of Entrepreneurial Investment," Working Papers 225812, University of California, Davis, Department of Agricultural and Resource Economics.
    5. Andrea Attar & Thomas Mariotti & François Salanié, 2020. "The Social Costs of Side Trading," The Economic Journal, Royal Economic Society, vol. 130(630), pages 1608-1622.
    6. Dionne, G. & Doherty, N., 1991. "Adverse Selection In Insurance Markets: A Selective Survey," Cahiers de recherche 9105, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    7. Georges Dionne & Christian Gourieroux & Charles Vanasse, 1998. "Evidence of Adverse Selection in Automobile Insurance Markets," Working Papers 98-24, Center for Research in Economics and Statistics.
    8. Rachel Kreier & Bhaswati Sengupta, 2015. "Income, Health, and the Value of Preserving Options," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 43(4), pages 431-448, December.
    9. Allen C. Goodman & Miron Stano, 2000. "Hmos and Health Externalities: A Local Public Good Perspective," Public Finance Review, , vol. 28(3), pages 247-269, May.
    10. Renaud Bourlès & Dominique Henriet, 2012. "Risk-sharing Contracts with Asymmetric Information," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 37(1), pages 27-56, March.
    11. Gulcin Gumus & Tracy Regan, 2007. "Self-Employment and the Role of Health Insurance," Working Papers 0910, University of Miami, Department of Economics.
    12. Kifmann, Mathias, 2002. "Community rating in health insurance and different benefit packages," Journal of Health Economics, Elsevier, vol. 21(5), pages 719-737, September.
    13. Jennifer Feenstra Schultz & David Doorn, 2009. "Employer Health Benefit Costs and Demand for Part-Time Labor," Working Papers 09-08, Center for Economic Studies, U.S. Census Bureau.
    14. Roland Bénabou & Jean Tirole, 2016. "Bonus Culture: Competitive Pay, Screening, and Multitasking," Journal of Political Economy, University of Chicago Press, vol. 124(2), pages 305-370.
    15. De Feo, Giuseppe & Hindriks, Jean, 2014. "Harmful competition in insurance markets," Journal of Economic Behavior & Organization, Elsevier, vol. 106(C), pages 213-226.
    16. Lakdawalla, Darius & Sood, Neeraj, 2013. "Health insurance as a two-part pricing contract," Journal of Public Economics, Elsevier, vol. 102(C), pages 1-12.
    17. Gruber, Jonathan, 2011. "The Tax Exclusion for Employer-Sponsored Health Insurance," National Tax Journal, National Tax Association;National Tax Journal, vol. 64(2), pages 511-530, June.
    18. Richard N. Block & Sheldon Friedman & Michelle Kaminski & Andy Levin (ed.), 2006. "Justice on the Job: Perspectives on the Erosion of Collective Bargaining in the United States," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number joj.
    19. Laura Bucila, 2008. "Employment-Based Health Insurance and the Minimum Wage," Working Papers 0812, College of the Holy Cross, Department of Economics.
    20. Gemmo, Irina & Browne, Mark J. & Gründl, Helmut, 2017. "Transparency aversion and insurance market equilibria," ICIR Working Paper Series 25/17, Goethe University Frankfurt, International Center for Insurance Regulation (ICIR).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:pubfin:v:41:y:2013:i:1:p:3-36. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.