TY  - JOUR
AU  - Goldman,Dana
AU  - Sood,Neeraj
AU  - Leibowitz,Arleen
TI  - Wage and Benefit Changes in Response to Rising Health Insurance Costs
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11063
PY  - 2005
Y2  - January 2005
UR  - http://www.nber.org/papers/w11063
L1  - http://www.nber.org/papers/w11063.pdf
N1  - Author contact info:
Dana Goldman
Schaeffer Center for Health Policy and Economics
University of Southern California
3335 S. Figueroa St, Unit A
Los Angeles, CA 90089-7273
Tel: (213) 821-7948
Fax: (213) 740-3460
E-Mail: dana.goldman@usc.edu

Neeraj Sood
Schaeffer Center for Health Policy and Economics
3335 S. Figueroa Street, Unit A
Los Angeles, CA 90089-7273
Tel: 310/393-0411
Fax: 310/260-8156
E-Mail: nsood@healthpolicy.usc.edu

Arleen Leibowitz
School of Public Policy and Social Research
Department of Policy Studies
3250 Public Policy Building
Box 951656
Los Angeles, CA 90095-1656
Tel: 310/206-8653
Fax: 310/206-0337
E-Mail: arleen@ucla.edu
AB  - Many companies have defined-contribution benefit plans requiring employees to pay the full cost (before taxes) of more generous health insurance choices. Research has shown that employee decisions are quite responsive to these arrangements. What is less clear is how the total compensation package changes when health insurance premiums rise. This paper examines employee compensation decisions during a three-year period when health insurance premiums were rising rapidly. The data come from a single large firm with a flexible benefits plan wherein employees explicitly choose how to allocate compensation between cash wages and other benefits. Under such an arrangement, higher health insurance premiums must induce changes in the composition of total compensation -- either in lower after-tax wages or in decreased contributions to other benefits. The results suggest that about two-thirds of the premium increase is financed out of cash wages and the remaining one-thirds is financed by a reduction in benefits.
ER  -