Employer-sponsored health insurance for early retirees: impacts on retirement, health, and health care

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Abstract

The proportion of large employers offering retiree health insurance in the US has declined by half in the past 20 years. This paper examines the potential implications of this change by estimating the effects of a retiree health insurance (RHI) offer on a comprehensive set of labor, health and health care use outcomes in the near-elderly population. An RHI offer increases the probability of early retirement by 37% for both men and women. While the results suggest that an RHI offer has little, if any, effect on health, there is strong evidence that RHI provides significant protection from high out-of-pocket medical costs. In the top 40% of the out-of-pocket spending distribution, those with an offer of retiree coverage spend 22% less on average. Estimates of the value of RHI of over $4,000 per year suggest that increasing opportunities for the near-elderly to purchase coverage at actuarially-fair prices through the individual market or public programs could significantly increase insurance coverage and reduce financial risk for this age group.