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The Impact of Minimum Wage Increases on the Provision of Employer-Sponsored Insurance

Slide presentation from the AHRQ 2011 conference.

On September 19, 2011, Jessica Vistnes made this presentation at the 2011 Annual Conference. Select to access the PowerPoint® presentation (190 KB). Plugin Software Help.


Slide 1

 

The Impact of Minimum Wage Increases on the Provision of Employer-Sponsored Insurance

Jessica Vistnes

(co-author: Kosali Simon, Indiana University)

Slide 2

 

Background

  • Large changes in federal and state minimum wages from 2000-2008.
  • Most studies of minimum wages have focused on employment effects:
    • However, it is also important to understand how fringe benefits react:
      • Particularly if unintended consequences.
  • There is a small literature on the effect of minimum wages on health insurance:
    • All studies use data from Current Population Survey.
    • Therefore, no data on workforce characteristics:
      • Important information because of group nature of employers' health insurance decisions.

Slide 3

 

Minimum Wage Activity 2000-2008

  • Federal minimum wage changes:
    • 2007 to 2009 in steps from $5.15-$7.25.
    • First change in federal minimum wage in a decade (Fair Minimum Wage Act 2007).
  • State activity high 2000-2008:
    • 129 instances of states changing minimum wages over this time period:
      • Average change: 51.6 cents.
      • Range: 10 cents to $1.80.

Slide 4

 

Offer Rates

Year Firm Size Offer Rate Eligibility Rate
2000 All 88.97% 78.98%
<10 46.58% 83.77%
10-24 71.51% 78.57%
25-99 88.40% 75.11%
100-999 96.84% 77.93%
1000+ 99.38% 80.00%
2008 All 87.10%*** 78.22%
<10 43.66%*** 83.25%
10-24 68.79%* 78.56%
25-99 83.68%*** 74.91%
100-999 95.84% 76.38%
1000+ 98.94% 79.23%

Slide 5

 

Offers of Dependent Coverage

Year Firm Size Offer Family Coverage Offer Any Dependent Coverage
2000 All 98.82%*** 98.95%***
<10 88.05%*** 89.43%***
10-24 96.82%*** 97.11%***
25-99 98.62%*** 98.80%*
100-999 99.93%*** 99.94%***
1000+ 99.97% 99.97%
2008 All 97.21% 98.09%
<10 76.55% 82.57%
10-24 89.38% 93.25%
25-99 96.75% 97.95%
100-999 99.38% 99.60%
1000+ 99.94% 99.99%

Slide 6

 

Prior Literature on Minimum Wages and Health Insurance

  • Royalty (2000, working paper).
  • Simon and Kaestner (2004).
  • Marks (2011).

Slide 7

 

Data

  • 2000-2008 MEPS-Insurance Component, private sector establishments:
    • 235,000 establishments, 230,000 plans.
  • Advantages:
    • Many dependent variables.
    • Contains wage distribution within the establishment:
      • % of workers with low wage, middle and high-wages:
        • Cutoff in 2008 is <$11, $11-25.50, >$25.50.
  • Disadvantage:
    • Limited ability to examine whether plans differ by wage level.

Slide 8

 

Dependent Variables

  • Establishment-level outcomes:
    • Establishment offers health insurance.
    • Eligibility rate, subset to establishments who offer.
    • Offers family coverage.
    • Offers any dependent coverage (either employee-plus-one or family coverage).

Slide 9

 

Dependent Variables (continued)

  • Plan-level outcomes:
    • Annual total employee contributions for single and family coverage (in dollars and in shares of total premiums).
    • Single deductible levels.
    • Actuarial value.
    • Single premium/actuarial value.
    • Plan is an health maintenance organization (HMO.
    • Plan is a preferred provider organization (PPO).

Slide 10

 

Other Explanatory Variables

  • Firm size.
  • Industry.
  • Age of business.
  • Ownership type.
  • Non-profit status.
  • Whether the establishment is located in an MSA.
  • The proportion female, age 50 and older, union members.
  • State fixed effects, Year fixed effects.
  • County unemployment rate.

Slide 11

 

Hypothesis and Method

  • Minimum wage effects will be larger at establishments with a higher concentration of low-wage workers.
  • We test our hypothesis by:
    • Comparing establishments with different levels of low-wage workers to those with no low-wage workers (Difference-in-Difference).
    • Identification comes from state increases above federal minimum wage levels.

Slide 12

 

Wage Categories

  • Wage categories defined as:
    • ALL_LOW (100% of workers are low-wage).
    • MOSTLY_LOW (≥50% of workers are low-wage).
    • SOME_LOW (>0 and <50% of workers).
    • NO_LOW (no workers are low-wage).

Slide 13

 

Model

  • Υi= α+
  • β1 * Xi,st +
  • β2 * ALL_LOWi,st +
  • β3 * MOSTLY_LOWi,st +
  • β4 * SOME_LOWi,st +
  • β5 * MINWAGEi,st +
  • Γ1 * ALL_LOWi,st * MINWAGEst +
  • Γ2 * MOSTLY_LOWi,st * MINWAGEst +
  • Γ3* SOME_LOWi,st * MINWAGEst + εi

Slide 14

 

OLS Models of Establishment-Level Health Insurance Outcomes

  Offer Proportion Eligible Offered Family Coverage Offered Any Dependent Coverage
All_Low* Minwage -0.016*** 0.000 -0.047*** -0.038**
Most_Low* Minwage -0.019*** -0.005 0.003 0.006
Some_Low* Minwage -0.006 -0.002 0.009* 0.012***
Minwage 0.004 0.002 -0.013** -0.018***
R-squared 0.38 0.23 0.15 0.11

Slide 15

 

Selected OLS Results for Plan-Level Outcomes

  Single Employee Contribution Employee Share of Single Premium Family Employee Contribution Employee Share of Family Premium Single Deductible
All_Low* Minwage 4.941 -0.001 134.904 0.015 -48.371
Most_Low* Minwage -1.596 -0.008** 29.636 0.000 -10.497
Some_Low* Minwage 25.106* 0.002 10.251 -0.002 -6.546
Minwage -27.640* -0.002 12.846 0.005 -45.324***
R-squared 0.06 0.09 0.14 0.12 0.14

Slide 16

 

Selected OLS Results for Plan Level Outcomes (continued)

  Plan Actuarial
Value
Total Premium/
Actuarial Value
HMO PPO
All_Low* Minwage 0.005 -194.816* 0.018 0.007
Most_Low*Minwage 0.003* -40.091 0.004 0.002
Some_Low*Minwage -0.001 -11.828 -0.004 0.003
Minwage 0.003*** -37.269 0 -0.008
R-squared 0.11 0.18 0.05 0.08

Slide 17

 

Sensitivity Checks

  • Does Medicaid/CHIP policy confound results?
    • Our results generally unchanged by inclusion of Medicaid/CHIP simulated eligibility variable.

Slide 18

 

Conclusions

  • Minimum wage increases led to:
    • Decreases in offer rates among entirely and majority low-wage employers.
  • Among those who offered:
    • Reductions in offers of family coverage and any dependent coverage:
      • For entirely low-wage employers.
    • No change in eligibility rates.
    • No change or inconsistent change for plan level outcomes.

Slide 19

 

Next Steps

  • New outcomes:
    • Other fringe benefits.
    • Take-up rate (corresponds to CPS question).
    • Whether employee premium contributions are positive or zero.
  • Alternative ways to measure minimum wage:
    • % increase rather than absolute increase.
    • % of the real median wage in the state, from the CPS.
    • Within specific industries.
Page last reviewed October 2014
Internet Citation: The Impact of Minimum Wage Increases on the Provision of Employer-Sponsored Insurance. October 2014. Agency for Healthcare Research and Quality, Rockville, MD. http://archive.ahrq.gov/news/events/conference/2011/vistnes/index.html

 

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