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UNITED STATES DEPARTMENT OF LABOR

Are the costs of employer-sponsored health insurance passed on to workers at the individual level (Lennon, 2021)

Review Guidelines

Causal Evidence Guidelines

There is no conflict of interest.

Citation

Lennon, C. (2021). Are the costs of employer-sponsored health insurance passed on to workers at the individual level. Economics & Human Biology, 41, 100995. https://doi.org/10.1016/j.ehb.2021.100995

Highlights

  • The study's objective was to examine the impact of employer-sponsored health insurance (ESI) on wages.
  • The study used a difference-in-differences design to compare changes in employees’ wages before and after the implementation of ESI. Using data from the Medical Expenditure Panel Survey (MEPS), the author conducted statistical models to examine wage changes for employees with higher medical expenditures.
  • The study found a significant relationship between the ESI and lower annual wages for workers with greater medical expenditures.
  • This study receives a moderate evidence rating. This means we are somewhat confident that the estimated effects are attributable to employer-sponsored health insurance (ESI), but other factors might also have contributed.

Features of the Study

The Affordable Care Act (ACA), enacted in 2010, requires that employers with more than 50 full-time equivalent employees provide employer-sponsored health insurance (ESI) to those employees who work more than 29 hours per week. Employees with higher medical costs could increase insurance costs, making it more expensive for the employer. This study investigates the impact of ESI on employee wages, focusing on employees with high medical expenses and whether these higher costs affect the wages of this specific group.

The author used data from the Medical Expenditure Panel Survey (MEPS), which collected information on health care usage, medical expenditures, health insurance coverage, demographics, and employment status. The study included individuals aged 27 to 55 who were in the MEPS panel data from 2006 to 2014. The time period before the ESI mandate (from 2006 to 2010) was the comparison period and the time period after the ESI mandate (from 2011 to 2014) was the intervention period. The author used statistical models to compare annual wages before and after the ESI mandate for employees with greater medical expenditures.

Findings

Earnings and wages

  • The study found a significant relationship between the ESI and lower annual wages for workers with greater medical expenditures, where wages dropped by $0.35 to $0.51 for every $1 increase in medical spending.

Considerations for Interpreting the Findings

The author noted that there was no information about the study participants’ access to medical insurance via a partner or spouse. Employees who choose to opt out of ESI might receive additional cash compensation or higher wages, as some companies provide financial incentives for not enrolling in the company's health insurance plan. This factor could influence the results observed in the study.

Causal Evidence Rating

The quality of causal evidence presented in this report is moderate because it was based on a well-implemented nonexperimental design. This means we are somewhat confident that the estimated effects are attributable to Employer sponsored mandated health insurance (ESI), but other factors might also have contributed.

Reviewed by CLEAR

June 2026