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How much money is your employer contributing to your health insurance?

Posted Oct 23 2012 12:00am

The answer is $0.

“But Healthcare Economist,” you may say, “I know that my employer contributes $X to my health insurance so this must be false.  Further, businesses always complain about the high cost of health insurance.”

Although businesses do contribute to your health insurance in a nominal way, these contributions are almost entirely offset through a reduction in your wage.  In other words, if your employer did not have to pay for your health insurance, they could offer you more money in salary.

This is the finding of a recent working paper by Kolstad and Kowalski (2012) .

As reported in the latest edition of the NBER Digest,

Full-time workers who gained coverage as a result of the reform earned $6,055 less per year relative to what their wages would have been had they not gained ESHI. This value represents nearly the entire average
cost of their health insurance to their employers. Building on this estimate, the authors estimate the welfare impact of the labor market distortion induced by health reform. They estimate that individuals who gained coverage through their employers valued approximately 76 cents of every dollar that their employers spent on their coverage. As the authors note, “because individuals valued ESHI, mandate-based health reform
in Massachusetts resulted in significantly less distortion to the labor market than it would have otherwise.”

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