Abstract
We study the role of health benefits in an employer's compensation strategy, given the overall goal of minimizing total compensation cost (wages plus health-insurance cost). When employees' health status is private information, the employer's basic benefit package consists of a base wage and a moderate health plan, with a generous plan available for an additional charge. We show that in setting the charge for the generous plan, a cost-minimizing employer should act as a monopolist who sells "health plan upgrades" to its workers, and we discuss ways tax policy can encourage efficiency under cost-minimization and alternative pricing rules.
Original language | English (US) |
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Pages (from-to) | 931-949 |
Number of pages | 19 |
Journal | Journal of Health Economics |
Volume | 24 |
Issue number | 5 |
DOIs | |
State | Published - Sep 2005 |
Externally published | Yes |
Keywords
- Adverse selection
- Benefits pricing
- Employer-provided health insurance
ASJC Scopus subject areas
- Health Policy
- Public Health, Environmental and Occupational Health