An investigation spearheaded by a scholar from the Johns Hopkins Bloomberg School of Public Health has illuminated that a one-dollar elevation in minimum wages across the state and federal domains from 2002 to 2020 correlated with a modest dip in the share of employers providing health insurance.
This reduction, quantified at 0.92 percentage points in employer-sponsored insurance, predominantly emanated from smaller enterprises harbouring fewer than 50 workers and a substantial portion of low-wage earners. Further insights from the study revealed that a one-dollar surge in the minimum wage was also tied to a 1.83 percentage-point uptick in the frequency of insurance plans mandating a deductible, a trend observable across large and minuscule firms.
The research is positioned as a pioneering endeavour to dissect how variations in minimum wage legislation might elicit divergent reactions from employers, depending on the business scale or employee wage distribution.
Published in the Journal of Health Economics on October 27, the study also dispelled the notion that hikes in minimum wage adversely affect overall insurance coverage rates. This stability is attributed to the increased enrollment in Medicaid by employees, particularly pronounced following the enactment of the Affordable Care Act (ACA). The ACA, which took effect in 2010 and began regulating the small-group, employer-sponsored insurance market in 2014, magnified the impacts of minimum wage adjustments.
Mark Meiselbach, PhD, an assistant professor at the Bloomberg School’s Department of Health Policy and Management and lead author of the study, stressed the critical role of alternative insurance avenues for low-income workers amid discussions on raising minimum wage levels nationally. His research collaborates with Jean Abraham, PhD, a professor at the University of Minnesota School of Public Health, further emphasizing the significant reliance of millions of Americans on their employers for health insurance. With an estimated 178 million individuals covered under employer-offered plans in 2022, wage legislation and employer health benefits provision have substantial implications for the workforce.
The analysis, leveraging data from the Medical Expenditure Panel Survey-Insurance Component (MEPS-IC) from 2002 to 2020, also delves into how shifts in minimum wage laws influence aspects like employee eligibility, benefit design, and premium costs out-of-pocket. By integrating state minimum wage data from the University of Kentucky Center for Poverty Research National Welfare Data, the study enhances the understanding of employer behaviour in response to wage policy alterations.
Significantly, the findings echo prior studies suggesting that minimum wage increases could decrease enrollment in employer-sponsored insurance, primarily due to employer decisions on plan offerings rather than employee eligibility or enrollment choices. The most pronounced effects were observed among smaller businesses, underscoring their sensitivity to insurance offering costs. The study notes that while deductible requirements saw adjustments, minimum wage laws primarily affected other benefit design dimensions.
Exploring the varied impacts of different magnitudes of minimum wage increases, the research indicates that both modest and significant hikes are associated with reductions in employer health insurance offerings. These effects intensify over time, especially after the third year following a minimum wage increase.
Meiselbach emphasizes the importance of ensuring accessible, affordable insurance options outside employer-sponsored plans in light of the tight coupling between employment and health insurance in the U.S. The study calls for policymakers to closely monitor the decline in employer-sponsored insurance among small businesses, highlighting potential long-term implications.
In response to potential coverage gaps, employers have mechanisms such as Qualified Small Employer Health Reimbursement Arrangements and Individual Coverage Health Reimbursement Arrangements, introduced under the 2016 21st Century Cures Act. These alternatives, alongside the expansion of Medicaid and subsidies for individual market insurance purchases, are presented as viable solutions to mitigate the impacts of minimum wage increases on health insurance coverage.
More information: Mark K. Meiselbach and Jean M. Abraham, Do minimum wage laws affect employer-sponsored insurance provision? Journal of Health Economics. DOI: 10.1016/j.jhealeco.2023.102825
Journal information: Journal of Health Economics Provided by Johns Hopkins Bloomberg School of Public Health