TY  - JOUR
AU  - Gruber,Jonathan
AU  - Washington,Ebonya
TI  - Subsidies to Employee Health Insurance Premiums and the Health Insurance Market
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9567
PY  - 2003
Y2  - March 2003
UR  - http://www.nber.org/papers/w9567
L1  - http://www.nber.org/papers/w9567.pdf
N1  - Author contact info:
Jonathan Gruber
MIT Department of Economics
E52-355
50 Memorial Drive
Cambridge, MA 02142-1347
Tel: 617/253-8892
Fax: 617/253-1330
E-Mail: gruberj@mit.edu

Ebonya L. Washington
Yale University
Box 8264
37 Hillhouse, Room 36
New Haven, CT 06520
Tel: 203/432-9901
Fax: 203/432-6323
E-Mail: ebonya.washington@yale.edu
AB  - One approach to covering the uninsured that is frequently advocated by policy makers is subsidizing the employee portion of employer-provided health insurance premiums.  But, since the vast majority of those offered employer-provided health insurance already take it up, such an approach is only appealing if there is a very high takeup elasticity among those who are offered and uninsured.  Moreover, if plan choice decisions are price elastic, then such subsidies can at the same time increase health care costs by inducing selection of more expensive plans.  We study an excellent example of such subsidies: the introduction of pre-tax premiums for postal employees in 1994, and then for the remaining federal employees in 2000.  We do so using a census of personnel records for all federal employees from 1991 through 2002.  We find that there is a very small elasticity of insurance takeup with respect to its after-tax price, and a modest elasticity of plan choice.  Our results suggest that the federal government did little to improve insurance coverage, but much to increase health care expenditures, through this policy change.
ER  -