Market Factors Influencing the Choice and Generosity of Health Insurance Plans Offered to Employees

This dissertation investigates the market characteristics and policies that influence the provision of employer-sponsored health insurance. I examine the impact of three specific factors influencing employer-sponsored insurance: labor market concentration, local health care costs, and regulation of the self-funded market. In Chapter 1, I examine the impact of labor market concentration on the health benefits that employers offer. I find that that increased labor market concentration is associated with higher employee premium contributions, but has no meaningful effect on total plan premiums, resulting in an increased share of premiums paid by employees. Additionally, I find an increase in the prevalence of narrower network plans associated with increases in labor market concentration, concentrated primarily within employers in the health care sector. These findings suggest that antitrust regulatory agencies should consider the potential impact of labor market concentration on health benefits when considering future cases of mergers and acquisitions. In Chapter 2, I investigate how increases in local health care costs influence the health benefits that employers offer. I implement an instrumental variable analysis where I instrument for changes in average premiums using changes in malpractice payments made in a state-year. I find that increases in local health care costs get passed on to employees in the form of higher premium contributions overall, leading to employees paying an increased share of the total premium. In Chapter 3, I explore the role of financial risk in determining whether employers choose to self-fund their own offered health insurance. I examine the impact of stop loss regulation in California that made it riskier for small employers to self-fund their insurance on the prevalence of self-funded plans and any health insurance offered my small employers. I find that California’s stop loss regulation resulted in a large decrease in the prevalence of employers offering self-funded health insurance, among those that offered insurance, compared to a group of comparison states without similar regulation. Additionally, I find that the law also led to a decline in the rate of small employers offered any health insurance at all, pointing to a potential unintended consequence of the law