How Much Does Access to Health
Insurance Influence the Timing of
Retirement?
NORMA B. COE
UNIVERSITY OF WASHINGTON AND NBER
GOPI SHAH GODA
STANFORD UNIVERSITY AND NBER
CBO: ACA  Large Reductions in Labor Supply
`“CBO estimates that the ACA will reduce the total
number of hours worked, on net, by about 1.5
percent to 2.0 percent during the period from 2017
to 2024, almost entirely because workers will
choose to supply less labor—given the new taxes
and other incentives they will face and the financial
benefits some will receive.”
Source: CBO (2014), Budget and Economic Outlook: 2014-2024, Appendix C: Labor
Market Effects of the Affordable Care Act.
ACA Provisions Affecting Labor Supply
1.
The subsidies for health insurance purchased
through exchanges;
2. The expansion of Medicaid eligibility;
3. The penalties on employers that decline to offer
insurance; and
4. The new taxes imposed on labor income.
Source: CBO (2014), Budget and Economic Outlook: 2014-2024, Appendix C: Labor
Market Effects of the Affordable Care Act.
Another Channel: ACA Rating Regulations
 Guarantee issue/renewability
 Rating variation based only on:
 Age (3:1 ratio)
 Premium rating area
 Family composition
 Tobacco use (1.5:1 ratio)
 Affects individual market, small group market, and
exchange
Source: Kaiser Family Foundation Summary of the Affordable Care Act, April 2013,
http://kff.org/health-reform/fact-sheet/summary-of-the-affordable-care-act/
Regulations Will Affect Near-Elderly Retirees
 Prior to Medicare eligibility, retirees generally access
health insurance from one of four primary sources:




Retiree health insurance from previous employer/union
Spouse’s employer
COBRA coverage
Individual market
 Regulations are likely to reduce premiums for older
and sicker individuals in the individual market
Research Question and Empirical Strategy
 How do rating regulations affect the timing of
retirement?
 Exploit variation in state regulatory environments
over time to estimate the impact of regulations on
retirement hazards


Code a state as having a “Strictly Regulated Market” if it has
both guaranteed issue and community rating regulations in
place (Herring and Pauly 2006)
Data on state regulations compiled from Kaiser Family
Foundation (2010), Georgetown University Health Policy
Institute (2004), and Wachenheim and Leida (2007)
Previous Literature
 Relationship between health insurance and
retirement behavior


COBRA (Gruber and Madrian 1995, 1996)
Retiree health insurance

Reduced form (Karoly and Rogoski 1994; Rogowski and Karoly 2000; Johnson,
Davidoff and Perese 2003; Gruber and Madrian 1995; Linsenmeier 2002; Marton
and Woodbury 2006; Blau and Gilleskie 2001; Gruber and Madrian 2002; Nyce et
al. 2013)

Structural models (Gustman and Steinmeier 1994; Rust and Phelan 1997;
French and Jones 2011; Blau and Gilleskie 2006, 2008)

Public sector (Leiserson 2013; Shoven and Slavov 2013; Fitzpatrick 2013)
 Rating regulations and premiums (Herring and Pauly 2006;
Belloff and Cantor 2008; LoSasso 2011)
Number of States with
Strict Health Insurance Regulations
9
6
3
0
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Health and Retirement Study, 1996-2010
 Linked to restricted geographic identifiers
 Hazard framework (following Behaghel and Blau
2012)
Pias  HI ias   a   s   ias
 Outcomes
 Exiting the labor force
 Retirement self-report
 Claiming Social Security retirement benefits
Sample Restrictions
 Unit of observation: person-months
 Being in sample conditional on not having claimed,
retired, or exited labor force in month prior to 60th
birthday
 Exit the sample via




failure (claiming, exiting, retiring),
death,
survey attrition,
reaching age 65 or calendar year 2010
Hypothesized Interactions
 Fair/poor health status: Since regulations
usually decrease the premiums for sicker individuals,
effect should be stronger among those in worse
health status
 Spousal health insurance: Those with other
sources of health insurance should respond less to
regulations because they are less likely to obtain
health insurance in the individual market
Effect of Strictly Regulated Non-Group Health Insurance
Markets on Labor Force and Claiming Decisions, by age
Age
60
Panel A: Exit the Labor Market
Strictly Regulated Market
-0.0164 **
(0.0062)
61
62
0.0031
(0.0053)
0.0051
(0.0122)
0.0155
0.0154
0.0305
0.0218
0.0217
Adjusted R2
0.025
Observations
26,291
Panel B: Self-Reported Retirement
Strictly Regulated Market
-0.0142
(0.0157)
0.024
25,893
0.047
22,867
0.036
20,313
0.035
19,160
-0.001
(0.0038)
0.021
(0.0145)
-0.0039
(0.0042)
-0.0078
(0.0139)
0.0125
0.0132
0.0378
0.0202
0.0214
Adjusted
0.018
Observations
29,646
Panel C: Claiming Social Security
Strictly Regulated Market
N/A
0.01
29,536
0.057
23,452
0.031
19,562
0.018
17,226
N/A
0.0055
(0.0120)
-0.0063
(0.0058)
-0.0069
(0.0288)
Mean of Dep Variable
0.073
0.0271
0.0258
R2
0.125
32,340
0.048
22,285
0.025
19,263
Mean of Dep Variable
Mean of Dep Variable
R2
Adjusted
Observations
Standard errors in parentheses
63
0.0222 ***
(0.0037)
64
-0.0121
(0.0201)
Effect of Strictly Regulated Non-Group Health Insurance Markets on
Labor Force and Claiming Decisions, by age and health status
Age
Panel A: Exit the Labor Market
Strictly Regulated Market
Strictly Regulated Market * Poor health
Panel B: Self-Reported Retirement
Strictly Regulated Market
Strictly Regulated Market * Poor health
Panel C: Claim Social Security
Strictly Regulated Market
Strictly Regulated Market * Poor health
Standard errors in parentheses
60
61
62
-0.0163 ***
(0.0060)
0.003
(0.0054)
0.0044
(0.0120)
0.0227 ***
(0.0038)
-0.0135
(0.0203)
-0.001
(0.0046)
0.0008
(0.0040)
0.0152
(0.0103)
-0.0092
(0.0140)
0.0117 *
(0.0066)
-0.0143
(0.0154)
-0.0003
(0.0037)
0.0201
(0.0146)
-0.0029
(0.0047)
-0.0074
(0.0139)
0.0004
(0.0038)
-0.0098 ***
(0.0033)
0.03 ***
(0.0061)
-0.0116
(0.0095)
-0.0044
(0.0039)
0.0056
(0.0121)
-0.0069
(0.0059)
-0.0062
(0.0285)
-0.0013
(0.0055)
0.0111 *
(0.0065)
-0.0086 *
(0.0043)
N/A
N/A
63
64
Effect of Strictly Regulated Non-Group Health Insurance Markets on Labor
Force and Claiming Decisions, by age and spousal access to health insurance
Age
60
61
62
63
64
-0.0169 **
(0.0063)
0.0032
(0.0051)
0.0068
(0.0122)
0.0199 ***
(0.0039)
-0.016
(0.0196)
0.0021
(0.0022)
-0.0005
(0.0028)
-0.0072 *
(0.0043)
0.0092 **
(0.0041)
0.015 *
(0.0086)
-0.0145
(0.0157)
-0.0009
(0.0043)
0.0258 *
(0.0141)
-0.0064
(0.0045)
-0.0118
(0.0126)
0.0014
(0.0032)
-0.0003
(0.0028)
Panel A: Exit the Labor Market
Strictly Regulated Market
Strictly Regulated Market * Has access to Spousal
HI
Panel B: Self-Reported Retirement
Strictly Regulated Market
Strictly Regulated Market * Has access to Spousal
HI
-0.0212 ***
0.0081 *
(0.0044)
(0.0040)
0.0119 *
(0.0066)
0.0049
(0.0118)
-0.0106 **
(0.0051)
-0.0065
(0.0292)
0.0021
(0.0034)
0.0149 *** -0.0012
(0.0042)
(0.0066)
Panel C: Claim Social Security
Strictly Regulated Market
Strictly Regulated Market * Has access to Spousal
HI
Standard errors in parentheses
Next Steps
 Sensitivity analysis by current source of health
insurance
 Understand intensive measure responses on hours of
work/FT status
 Obtain average individual health insurance prices by
state and year from MEPS

Instrument with regulatory environment
 Incorporate state-level changes in Medicaid
eligibility
Implications for ACA and Retirement
 Little evidence that regulatory environment
influences retirement timing
 Effects of ACA on retirement behavior may depend
more on changes in retiree health insurance and
employer-sponsored health insurance