1. Age Related Health Costs and Job Prospects of Older Workers
A discussion by
Joanna Lahey
Texas A&M University and NBER

2. We know surprisingly little about
How do older workers’ healthcare costs compare to younger workers?
Do these costs affect their job prospects?
Hiring?
Sorting into firms?
Hours?
Do these costs affect wages?

3. What we do know
Health insurance costs may shift job structures towards fewer full-time employees (Cutler and Madrian 1996)
More part-time jobs that don’t have to offer health insurance
Older age hiring is low in firms that offer Health Insurance (Scott et al )
Firms with benefits are different (better) than those without, may value long-term firm-specific human capital investments (Hu 2003)
New hires with high HI costs sort into large firms or firms that don’t offer health insurance (not small firms with HI) (Kapur et al. 2008)
Retiree coverage availability increases probability of retirement (Kapur and Rogowski 2011)
Oddly– a lot of the major papers in this field never got published, which is irritating.

4. I tried to look at this question once
Medstat data from
Age band/gender/state/year cells (Normalized by dividing by largest #)

5. Burtless paper does a better job
Able to look at DEPENDENT costs
Husbands will be covering (some) wives– shouldn’t have flat costs
Probability of covering children varies by age
Able to look at OFFER and TAKE-UP of insurance
Not looking at selected sample of people who take-up the offer
Take-up rates vary by age

6. Surprising (important) findings
People over 65 have lower ESI take-up rates
May tie into uptick in interviews found in US audit/lab studies
Take-up rates (conditional on offer) don’t really change until age 50
Age group has highest dependent enrollment
(Less surprising, still important): Even with lower take-up and dependency rates, workers (mostly) get more expensive with age
Particularly true for ages 55+
65+ is more expensive than 50-54, but less expensive than 55-64

8. I would like to see more on
Gender
Dependent rates by gender
Pregnancy incidence (difficult to see after 2008)
Surely not everything is identical by gender?
What was the ACA world in (which ACA changes implemented?)
How do employers play with dependent premiums to discourage dependent take-up (or to encourage SAH spouses…)?
How do third-party insurers deal with risk?
Is there experience rating?
What kinds of regulations limit premium ratios by worker age?

9. Would like to see more on: Do wages change?
If benefits are valued by the workers, they should be lower
But wages are sticky in a low-inflation environment, and older workers move around less
Even if there aren’t explicit wage cuts, higher costs may be baked into earnings profiles without obviously violating ADEA
Also: ADEA may allow different treatment of total compensation packages
Cities with higher health insurance costs have a flatter age/wage profile (Sheiner 1999)
Cities with high health care costs are different (HMO penetration, technological diffusion, transportation costs, wages, etc.)
Scott J. Adams JPubE (2007)
NY enacted pure community rating => insurers had to charge the same premium for older and younger workers
Relative wages for older workers increased

10. Would like to see more on: Average costs vs. cost variance
For larger firms, average costs may be the only important thing
For smaller firms, variance (predictability) becomes more important
How do HI cost variances differ among different kinds of workers (and their dependents)?

11. Bottom Line
Paper answers an important question that we should know the answer to: How much more does workers’ health insurance cost employers by age?
Answer: Not much more (than 30 year olds) until age 55, then ~$ K more per year.
Can’t explain *all* of the age discrimination found in studies
Discrimination starts at earlier ages
Discrimination is found in firms and for positions that don’t offer HI
Can explain some of it!

12. Thank you!