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Does retiree health insurance encourage early retirement? (Nyce et al. 2013)

Absence of conflict of interest.

Citation

Nyce, S., Schieber, S. Shoven, J. B., Slavov, S., & Wise, D. A. (2013). Does retiree health insurance encourage early retirement? Journal of Public Economics, 104, 40-51.

Highlights

  • The study’s objective was to examine the impact of employer-provided retiree health insurance on early retirement.
  • The authors used a nonexperimental design to compare early retirement outcomes of employees who are eligible for retiree health insurance with that of those who have no coverage.
  • The study found that people who were employed at age 57 and eligible for employer-subsidized retiree health coverage were significantly more likely to retire at ages 62 to 64 (before becoming eligible for Medicare at age 65) compared with those with no coverage.
  • The quality of causal evidence presented in this report is low because the authors did not account for other factors that could have affected the difference between the treatment and comparison groups. This means we are not confident that the estimated effects are attributable to retiree health insurance; other factors are likely to have contributed.

Intervention Examined

Retiree Health Insurance

Features of the Intervention

In the United States, it is common for people to get the most affordable insurance coverage through their employers (who often subsidize the insurance cost) and retire at age 65, when people become eligible for Medicare. This study examined the impact of employer-subsidized retiree health insurance on retirement before age 65.

Features of the Study

The study used a nonexperimental statistical method to estimate the impacts. The study sample included 172,343 person-year observations derived from administrative records from 54 firms from 2005 to 2009. The employee-level data was linked to the firm-level survey on benefit provisions. Just over half of the sample was male, and ages ranged from 58 to 69, with an average age of 61.

Findings

Employment

  • The study found that people who were employed at age 57 and eligible for employer-subsidized retiree health coverage were significantly more likely to retire at ages 62 to 64 (before becoming eligible for Medicare at age 65) compared with those with no coverage.

Considerations for Interpreting the Findings

The authors did not account all for existing differences between the employees with access to retiree health coverage and those without. These existing differences—and not the retiree health insurance—could explain the observed differences in outcomes.

Causal Evidence Rating

The quality of causal evidence presented in this report is low because the authors did not account for other factors that could have affected the difference between the treatment and comparison groups. This means we are not confident that the estimated effects are attributable to retiree health insurance; other factors are likely to have contributed.

Reviewed by CLEAR

September 2019

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