Gerard Russo, Ph.D. Sang-Hyop Lee, Ph.D. Lawrence Nitz, Ph.D. Thamana Lekprichakul, Ph.D

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This research is funded in part through a U.S. Health Resources and Services Administration, State Planning Grant to the Hawaii State Department of Health. Sub-Contract Research Corporation of the University of Hawaii. Research conducted by the University of Hawaii, Social Science Research Institute in collaboration with the Hawaii State Department of Health, Hawaii Institute for Public Affairs: Hawaii Uninsured Project and the Hawaii Health Information Corporation.

The Effect of Mandatory Employer-Sponsored Health Insurance on the Use of Part-Time versus Full-Time Workers: The Case of Hawaii.

Gerard Russo, Ph.D.Sang-Hyop Lee, Ph.D.

Lawrence Nitz, Ph.D.Thamana Lekprichakul, Ph.D.

Rui Wang, Ph.D. CandidateUniversity of Hawai`i at Mānoa

Abdul Jabbar, Ph.D.International Islamic University, Islamabad

24 June 2006

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State Policy and Health Insurance CoverageSaturday, 24 June 2006 10:00-11:15 AM

Presentation 3: “The Effect of Mandatory Employer-Sponsored Health Insurance on the Use of Part-Time versus Full-Time

Workers: The Case of Hawaii.” Presenter: Gerard Russo

russo@hawaii.edu

State Health Research and Policy Interest Group MeetingJune 24, 200610:00 AM—4:00 PMWashington State Trade & Convention Center

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Institutional Partners & Collaborators Health Resources & Services Administration, State

Planning Grant Program Hawaii State Department of Health Hawaii Institute for Public Affairs, Hawaii Uninsured

Project Hawaii Health Information Corporation Robert Wood Johnson Foundation, AcademyHealth,

State Coverage Initiative University of Minnesota, State Health Access Data

Assistance Center University of Hawaii, Social Science Research Institute

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Prepaid Health Care Act of 1974 (Mandatory ESI) PHCA of 1974: requires all private-sector employers to provide health

insurance to full-time employees (i.e., 20+ hours per week) Exempt workers:

Part-time workers working less than 20 hours per week Low-earning workers earn less than 86.67 times minimum wage per

month (2006: $6.75 x 86.67=$585; 2007: $7.25 x 86.67=$628.) Government employees, self-employed, commission-only workers,

seasonal workers, family workers Collective bargaining contracts are exempt.

No other State has implemented mandatory ESI Employee Retirement Income Security Act (ERISA) generally prohibits

States from mandating economy–wide employment-based health and retirement benefits. The Federal government reserves that right.

Hawaii has a Congressionally granted ERISA exemption for the PHCA 1974 only.

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Research Program on Labor Market Effects of Mandatory ESI

Health Insurance Coverage Labor Force Utilization Wages Job Mobility

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Research Question

What is the impact of mandatory employer-sponsored insurance (ESI) on the distribution of employees by hours worked?

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Hypotheses

Mandated ESI increases the proportion of part-time workers as the labor market avoids the regulation. Thurston (1997)

Firms utilize full-time employees more intensely because the cost of mandated ESI is fixed per employee. Low marginal cost of an hour of labor among extant employees and declining average cost per hour. Cutler & Madrian (1998)

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Data Sources CPS Current Population Survey (CPS) Annual Social and Economic (ASEC)

Supplement (March Demographic Supplement) Basic Monthly Survey

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Measure of Hours Worked: Current Population Survey

Usual hours worked per week at main job held last week.

Available for all workers 1994-2005.

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Hawaii Resident Population Age 19-64

Military, Not-in-Labor-Force, Unemployed,Uncompensated Worker, Zero Hours, or Variable Hours

Civilian Workers Receiving Compensation1-99 Hours Per Week

Private Employees Self-Employed Government Employees

Collective Bargaining Non-Collective Bargaining

Hawaii Adults Age 19-64by Sector of Employment

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0

.1

.2.3

De

nsi

ty

0 20 40 60 80 100

Hours Worked

Hawaii U.S.

Probability Density of Non-Collective Bargaining Private-Sector Employees by Hours Worked Per Week: CPS ASEC 1995-2005

Hawaii sample size=6,450

49 States & DC sample size=528,284

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Percent Distribution Private-Sector Employees by Hours Worked: CPS March Supplement 1988-2005.

1-19 Hours 20-34 Hours 35+ Hours

Hawaii 4.86% 13.49% 81.64%

49 States & DC 4.09% 11.19% 84.71%

Nevada 1.77% 8.10% 90.13%

Michigan 5.15% 12.22% 82.63%

California 3.71% 11.77% 84.52%

Florida 2.62% 10.14% 87.24%Source: University of Hawaii weighted tabulations. Current Population Survey (CPS), Annual Social and Economic Supplement (ASEC) 1988-2005. Based on usual hours worked at main job. Excludes public sector workers, self-employed, and workers subject to collective bargaining.

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Percent of Private Sector Employees Working 1-19 Hours: CPS March Supplement 1988-2005

2.62%3.71%

5.15%

1.77%

4.86%4.09%

0%

1%

2%

3%

4%

5%

6%

Perc

en

t P

art

-Tim

e

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Percent of Private Sector Employees Working 20-34 Hours: CPS March Supplement 1988-2005

10.14%11.77%

12.22%

8.10%

13.49%11.19%

0%2%4%6%8%

10%12%14%16%

US

Hawai

i

Nevad

a

Mic

higan

Califo

rnia

Florid

a

Pe

rce

nt

20

-34

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Percent of Private Sector Employees Working 35+ Hours: CPS March Supplement 1988-2005

87.24%84.52%82.63%

90.13%

81.64%84.71%

74%76%78%80%82%84%86%88%90%92%

US

Hawai

i

Nevad

a

Mic

higan

Califo

rnia

Florid

a

Pe

rce

nt

Fu

ll-T

ime

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SAMPLE SIZE: CPS Basic Monthly Survey 1994-2005 (Hours Worked At Main Job, 1-99)

Number of Observations

State All Civilian WorkersNon-Collective Bargaining Private-Sector Employees

Hawaii 86,330 59,448

Nevada 114,276 90,372

Michigan 251,013 193,603

California 573,180 420,887

Florida 314,022 233,753

Total 1,338,821 998,063

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Percent Distribution Non-Collective Bargaining Private-Sector Employees by Hours Worked: CPS Basic Monthly Survey 1994-2005.

1-19 Hours 20-34 Hours 35+ Hours

Hawaii 4.10% 12.51% 83.39%

49 States & DC

Nevada 1.59% 7.79% 90.62%

Michigan 3.87% 11.39% 84.74%

California 3.17% 11.21% 85.62%

Florida 2.31% 9.95% 87.74%Source: University of Hawaii weighted tabulations. Current Population Survey (CPS), Basic Monthly Survey 1994-2005. Based on usual hours worked at main job. Excludes public sector workers, self-employed, and workers subject to collective bargaining.

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Percent of Non-Collective Bargaining Private-Sector Employees Working 1-19 Hours: CPS Basic Monthly Survey 1994-2005

2.31%3.17%

3.87%

1.59%

4.10%

0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%4.5%5.0%

Perc

en

t P

art

-Tim

e

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Percent of Private Sector Employees Working 20-34 Hours: CPS Basic Monthly Survey 1994-2005

9.95%11.21%11.39%

7.79%

12.51%

0.0%

2.0%4.0%

6.0%8.0%

10.0%12.0%

14.0%

Perc

en

t 20-3

4

20

Percent of Private Sector Employees Working 35+ Hours: CPS Basic Monthly Survey 1994-2005

87.74%85.62%84.74%

90.62%

83.39%

78%

80%82%

84%86%

88%90%

92%

Perc

en

t F

ull-T

ime

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0

.02

.04

.06

.08

.1

Density

0 20 40 60 80 100 Hours

NV HI

Probability Density of Private-Sector Employees by Hours Worked per Week: Hawaii vs. Nevada CPS Basic Monthly Survey 1994-2005

22

0

.02

.04

.06

.08

.1

Density

0 20 40 60 80 100 Hours

MI HI

Hawaii vs. Michigan: CPS Basic Monthly Survey 1994-2005

23

0

.02

.04

.06

.08

.1

Density

0 20 40 60 80 100 Hours

CA HI

Hawaii vs. California: CPS Basic Monthly Survey 1994-2005

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0

.02

.04

.06

.08

.1

Density

0 20 40 60 80 100 Hours

FL HI

Hawaii vs. Florida: CPS Basic Monthly Survey 1994-2005

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Why is the effect small?

Regulation is non-binding for most employers and employees.

Noncompliance? 2%-5%.

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Percent of Population Insured by Type of Insurance, CPS 1994-2004:11-Year Average

Medicare Medicaid Tricare ESI Private

Sub-TotalInsuredTotal Uninsured Total

Hawaii 13.2 11.0 10.2 66.0 73.7 90.4 9.6 100.0

USA 13.2 11.4 3.4 61.4 70.4 84.8 15.2 100.0

Nevada 12.4 7.0 4.3 63.9 71.1 82.2 17.8 100.0

Michigan 13.2 11.9 1.3 69.8 76.9 89.2 10.8 100.0

California 11.0 14.5 3.0 54.8 62.9 80.2 19.8 100.0

Florida 18.1 10.6 4.4 53.8 65.2 81.9 18.1 100.0

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Why is ESI so pervasive nationwide?

Lack of adverse selection Economies of scale in administration Favorable tax treatment of insurance

premiums

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Percent of Private Establishments that Offer Health Insurance by Average Wage of Work Force: Hawaii and United States, MEPS–IC 2003

100.0%88.2%

90.2% 86.2%77.8% 79.7%

72.0%

56.2%39.0%

59.1%

0%

20%

40%

60%

80%

100%

120%

Quartile I Quartile

II

Quartile

III

Quartile

IV

Total

Average Wage SOURCE: Agency for Healthcare Research and Quality, Center for Financing, Access and Cost Trends, Medical Expenditure Panel Survey-Insurance Component.

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Hawaii vs. California: Wage Quartile I

0

.02

.04

.06

.08

.1

Density

0 20 40 60 80 100 Hours

CA HI

First-Quartile Wage Rate, CPS Monthly Basic, 1994-2005

Usual Hours Worked Last Week at Main Job, CA-HI

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Hawaii vs. California: Wage Quartile II

0

.02

.04

.06

.08

.1

Density

0 20 40 60 80 100 Hours

CA HI

Second-Quartile Wage Rate, CPS Monthly Basic, 1994-2005

Usual Hours Worked Last Week at Main Job, CA-HI

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Hawaii vs. California: Wage Quartile III

0

.02

.04

.06

.08

.1

Density

0 20 40 60 80 100 Hours

CA HI

Third-Quartile Wage Rate, CPS Monthly Basic, 1994-2005

Usual Hours Worked Last Week at Main Job, CA-HI

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Hawaii vs. California: Wage Quartile IV

0

.02

.04

.06

.08

.1

Density

0 20 40 60 80 100 Hours

CA HI

Fourth-Quartile Wage Rate, CPS Monthly Basic, 1994-2005

Usual Hours Worked Last Week at Main Job, CA-HI

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0.0

5.1

.15

K-d

ensi

ty

0 20 40 60 80Hours Worked

Distribution of Uninsured Private-Sector Employees by Hours Worked: Five Year Average CPS 2001-2005

Percent Distribution of Uninsured Workers by Usual Hours Worked per Week at Main Job: Paid Private Sector Employees

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Further Research: Model-Based Estimates

Controls for Individual Worker Characteristics: Age, Gender, Education, Race, Marital Status, Health Status,

Industry of Employment, Firm/Establishment Size Controls for State-Specific Macroeconomic Conditions

Unemployment Rate, GSP Growth Rate, etc. Additional Controls for State-Specific Industrial

Structure Health Insurance Premiums MEPS-IC 1996-2004 Exploit the Underlying Panel of Workers in the CPS

Basic Monthly Survey Count Data Models, Multinomial & Ordinal Logit

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Mahalo!

This research is funded in part by U.S. Department of Health and Human Services

Health Resources & Services Administration State Planning Grant

Hawaii State Department of Health.