NATALIA ARANCO, Watson Wyatt Worldwide
Email: natalia.aranco@watsonwyatt.com
RODRIGO LLUBERAS, Watson Wyatt Worldwide
Email: rodrigo.lluberas@eu.watsonwyatt.com

The aim of this paper is to analyze the effect of medical health benefits liabilities on firms' share prices. First, we find that investors tend to over-react to healthcare obligations, with a one percent increment in healthcare liabilities leading to a more than one per cent decline in the market value of firms' equity. Secondly, as real market values cannot be measured without error, differences between market and firms' own valuations are to be expected. For healthcare obligations, however, the particular set of assumptions used in their estimation could intensify this disparity. To test this possibility, we try to measure the degree of market reliability in financial information provided by companies in their balance sheet. We find evidence to support the fact that other post-retirement employee benefits (OPEB) estimations are not as reliable as accounting measures for pension.

ROBERT W. FAIRLIE, University of California, Institute for the Study of Labor (IZA), RAND Corporation
Email: rfairlie@ucsc.edu
REBECCA A. LONDON, Stanford University
Email: rlondon@stanford.edu

In this study, we examine annual transitions into and out of health insurance coverage using matched data from the 1996 to 2004 Current Population Survey (CPS). We find evidence of several characteristics that are strongly associated with the likelihood of losing or gaining health insurance including race, education, unemployment, part-time employment status, employment size, and self-employment.

PAUL FRONSTIN, Employee Benefit Research Institute (EBRI)
Email: FRONSTIN@EBRI.ORG

This paper examines the status of health insurance coverage in the United States. Based on EBRI estimates from the U.S. Census Bureau's March 2008 Current Population Survey (CPS), it reflects 2007 data. It also discusses trends in coverage for the 1994-2007 period and highlights characteristics that typically indicate whether an individual is insured. Specifically, the paper discusses recent trends in health insurance coverage and some of their causes; the determinants of having employment-based or other types of health insurance coverage; the uninsured population and the factors associated with being uninsured; and policy implications. The final section of the report presents conclusions. Data sources are discussed in the appendix.

The data are based primarily on the March 2008 Current Population Survey (CPS), with some analysis based on other Census surveys. The report focuses on the nonelderly population (under age 65) because this group can receive health insurance coverage from a number of different sources. The estimates presented in this report focus solely on the nonelderly and differ from those published by the Census Bureau. The nonelderly focus here is because Medicare covers nearly all of the elderly population. As a result of this difference between EBRI and Census Bureau estimates, this report shows a higher percentage of uninsured in the United States.

BARTON H. HAMILTON, Washington University, St. Louis - John M. Olin School of Business
Email: Hamiltonb@olin.wustl.edu
JAMES MARTON, Georgia State University, Andrew Young School, Department of Economics
Email: marton@gsu.edu

Despite the fact that flexible spending accounts (FSAs) are becoming an increasingly popular employer-provided health benefit, there has been very little empirical study of FSA use among employees at the individual level. This study contributes to the literature on FSAs through the use of a unique dataset that provides three years of employee-level matched benefits data. Motivated by the theoretical model of FSA choice presented in Cardon and Showalter (2001), we examine the determinants of FSA participation and contribution levels using cross sectional and random effect two part models. FSA participation and health plan choice are also modeled jointly in each year using conditional logit models. We find that, even after controlling for a number of other demographic characteristics, non-whites are less likely to participate in the FSA program, have lower contributions conditional on participation, and have a lower probability of switching to new lower cost share, higher premium plans when they were introduced. We also find evidence that choosing health plans with more expected out-of-pocket expenses is correlated with use of the FSA program.

JONNEKE BOLHAAR, Free University of Amsterdam - Department of Economics
Email: jbolhaar@feweb.vu.nl
MAARTEN LINDEBOOM, Free University of Amsterdam - Department of Economics, Tinbergen Institute Amsterdam, Institute for the Study of Labor (IZA)
Email: mlindeboom@econ.vu.nl
BAS VAN DER KLAAUW, Free University of Amsterdam - Department of Economics, Centre for Economic Policy Research (CEPR), Institute for the Study of Labor (IZA)
Email: klaauw@tinbergen.nl

We investigate the presence of moral hazard and advantageous or adverse selection in a market for supplementary health insurance. For this we specify and estimate dynamic models for health insurance decisions and health care utilization. Estimates of the health care utilization models indicate that moral hazard is not important. Furthermore, we find strong evidence for advantageous selection, largely driven by heterogeneity in education, income and health preferences. Finally, we show that ignoring dynamics and unobserved fixed effects changes the results dramatically.

MARK C. WEBER, DePaul University College of Law
Email: mweber@depaul.edu

This paper asks whether statutory social insurance programs, which provide contributory tax-based income support to people with disabilities, are compatible with the disability rights movement's ideas. Central to the movement that led to the Americans with Disabilities Act is the insight that physical or mental conditions do not disable; barriers created by the environment or by social attitudes keep persons with physical or mental differences from participating in society as equals.

The conflict between the civil rights approach and insurance seems apparent. A person takes out insurance to deal with tragedy, such as premature death, or damage, such as accidental harm to an automobile or home. Social insurance, for example, the United States Social Security old-age and disability programs, consists of government-run insurance to cover risks of advanced age and disability for which the private market has not provided affordable coverage. But the civil rights approach to disability posits that disability is not a risk, not tragedy, and not a damage or defect. Instead it is a maladaptation of society to human variation.

This paper argues that a justification remains for social insurance under the civil rights approach to disability, and further suggests that expansion of social insurance for disability is both compatible with disability rights principles and supported by wise public policy.

ROBERT W. FOGEL, University of Chicago - Graduate School of Business, National Bureau of Economic Research (NBER)
Email: rwf@cpe.uchicago.edu

One of the most important debates among health economists in rich nations is whether advances in biotechnology will spare their health care systems from a financial crisis. We must consider that prevalence rates of chronic diseases declined during the twentieth century and that this rate of decline has accelerated. However, health care costs may continue to increase even as the age of onset of chronic diseases is delayed, because the proportion of a cohort living to late ages will increase. The accelerating decline in the prevalence of chronic diseases during the course of the twentieth century supports the proposition that increases in life expectancy during the twenty-first century will be fairly large, but the effect on health care in the U.S. will be modest. The income elasticity for health services is calculated at 1.6, meaning that income expenditures on health care in the U.S. are likely to rise from a current level of about 15 percent to about 29 percent of GDP in 2040.