NASSER DANESHVARY, University of Nevada, Las Vegas - Department of Economics
Email: nasser.daneshvary@unlv.edu
TERRENCE M. CLAURETIE, University of Nevada, Las Vegas - Department of Finance
Email: mike.clauretie@unlv.edu

We present evidence that accurate estimates of the labor-earning/employer-provided health insurance trade-off must account for two different effects: the heterogeneity of jobs and the endogeneity of health insurance. The size of the trade-off depends on employees contribution to premiums, health-care needs, and valuation of insurance. We use Medical Expenditure Panel Survey data and instrumental variables/two-stage least squares. On average, workers accept about 16.5% to 20% lower earnings in return for insurance, and married women value insurance by about 3.5 percentage points more than married men, explaining about 3% of the gender-earning differentials. Health insurance does not contribute to the unexplained portion of the gender-pay gap.

BURGESS J.W. RABY, Raby Law Offices, University of Arizona Law School, Arizona State University Law School
Email: RABYLAW@AOL.COM
WILLIAM L. RABY, Raby Law Offices, Arizona State University - School of Accountancy & Information Management
Email: William.Raby@asu.edu

Burgess J. W. Raby and William L. Raby discuss the tax treatment of medical expense prepayments and the deductibility of continuing care retirement community costs.

STUART CRAINER, London Business School
Email: scrainer@london.edu

Stuart CrainerMike CritelliNo one running a company, large or small, can ignore the rising costs of healthcare. Yet, for all the attention paid to it, few companies feel that they have a state-of-the-art healthcare system. One company that has made great strides in this direction is Pitney Bowes, whose Executive Chairman has been a leader on new ways to think about healthcare. Here, he talks with about the progress his company has made as well as the fact that healthcare is an important issue that communities and nations must also address.Mike CritelliStuart Crainer

EDWARD A. ZELINSKY, Benjamin N. Cardozo School of Law
Email: ZELINSKY@PRODIGY.NET

This Article focuses on two significant questions in the aftermath of the Ninth Circuit's decision in Golden Gate Restaurant Association, which stayed a District Court ruling that had held the San Francisco Health Care Security Ordinance preempted by federal law. The core of that ordinance is the requirement that covered employers in San Francisco make minimum outlays for their own programs for their employees' health care or instead make contributions in the required amounts to the city to finance either San Francisco's Health Access Program (HAP) or municipally-run health reimbursement accounts. I conclude that under the U.S. Supreme Court's decisions construing ERISA Section 514(a), ERISA preempts the San Francisco Health Care Security Ordinance.

An important, but so far unrecognized, consideration is that employers' payments to the City of San Francisco under the ordinance constitute ERISA-governed health plans because employers, by those payments, either purchase for their employees lower premiums for coverage in the city's Health Access Program or fund municipally-run health reimbursement accounts for those employees. By its ordinance, San Francisco is not just regulating employers' ERISA-governed health plans; it is administering such plans.

San Francisco's regulation of employers' ERISA-governed health plans is deep, intruding substantively and procedurally into each such plan via the ordinance's minimum expenditure and administrative requirements. Moreover, San Francisco's regulation of such plans is broad. Virtually all employer outlays for medical care constitute employee benefit plans under ERISA, whether such outlays are self-administered by the employer, are administered for the employer by a third party such as an insurer, or are administered by the city through its Health Access Program or its municipally-run reimbursement accounts. The San Francisco ordinance regulates the entire spectrum of these ERISA-governed plans. In addition, San Francisco's regulation of employers' ERISA health plans is direct, targeting such plans and impacting upon them directly by means of the ordinance's expenditure mandates and recordkeeping obligations.

DAVID M. CUTLER, Harvard University - Department of Economics, National Bureau of Economic Research (NBER)
Email: DCUTLER@HARVARD.EDU
AMY FINKELSTEIN, Massachusetts Institute of Technology (MIT) - Department of Economics, National Bureau of Economic Research (NBER)
Email: afink@mit.edu
KATHLEEN M. MCGARRY, University of California, Los Angeles - Department of Economics, National Bureau of Economic Research (NBER)
Email: mcgarry@ucla.edu

Standard theories of insurance, dating from Rothschild and Stiglitz (1976), stress the role of adverse selection in explaining the decision to purchase insurance. In these models, higher risk people buy full or near-full insurance, while lower risk people buy less complete coverage, if they buy at all. While this prediction appears to hold in some real world insurance markets, in many others, it is the lower risk individuals who have more insurance coverage. If the standard model is extended to allow individuals to vary in their risk tolerance as well as their risk type, this could explain why the relationship between insurance coverage and risk occurrence can be of any sign, even if the standard asymmetric information effects also exist. We present empirical evidence in five difference insurance markets in the United States that is consistent with this potential role for risk tolerance. Specifically, we show that individuals who engage in risky behavior or who do not engage in risk reducing behavior are systematically less likely to hold life insurance, acute private health insurance, annuities, long-term care insurance, and Medigap. Moreover, we show that the sign of this preference effect differs across markets, tending to induce lower risk individuals to purchase insurance in some of these markets, but higher risk individuals to purchase insurance in others. These findings suggest that preference heterogeneity may be important in explaining the differential patterns of insurance coverage in various insurance markets.

JONATHAN GRUBER, Massachusetts Institute of Technology (MIT) - Department of Economics, National Bureau of Economic Research (NBER)
Email: gruberj@mit.edu

One of the major social policy issues facing the U.S. in the first decade of the 21st century is the large number of Americans lacking health insurance. This article surveys the major economic issues around covering the uninsured. I review the facts on insurance coverage and the nature of the uninsured; focus on explanations for why the U.S. has such a large, and growing, uninsured population; and discuss why we should care if individuals are uninsured. I then focus on policy options to address the problem of the uninsured, beginning with a discussion of the key issues and available evidence, and then turning to estimates from a micro-simulation model of the impact of alternative interventions to increase insurance coverage.