Do minimum wage laws affect employer-sponsored insurance provision?

Abstract

Employers may respond to minimum wage increases by adjusting their health benefits. We examine the impact of state minimum wage increases on employer health benefit offerings using the 2002–2020 Medical Expenditure Panel Survey – Insurance/Employer Component data. Our primary regression specifications are difference-in-differences models that estimate the relationship between within-state changes in employer-sponsored insurance and minimum wage laws over time. We find that a $1 increase in minimum wages is associated with a 0.92 percentage point (p.p.) decrease in the percentage of employers offering health insurance, largely driven by small employers and employers with a greater share of low-wage employees. A $1 increase is also associated with a 1.83 p.p. increase in the prevalence of plans with a deductible requirement, but we do not find consistent evidence that other benefit characteristics are affected. We find no consequent change in uninsurance, likely explained by an increase in Medicaid enrollment.