Worker preferences, sorting and aggregate patterns of health insurance coverage

Abstract

To assess the performance of the employment-based health insurance system, it is necessary to understand how well workers sort into jobs that offer their desired mix of cash wages relative to benefits. However, few studies directly measure the extent of sorting. We quantify the prevalence of mismatches between workers' preferences and firms' insurance offerings by considering two types of mismatch: (1) workers who appear to desire coverage through their employer, but work for firms that do not offer coverage, and; (2) workers who appear not to desire coverage through their employer, but work for firms that offer coverage. Most workers (79.6%) enjoy labor market matches that appear consistent with their preferences. The remaining 20.4% of workers appear to be mismatched. For most of these mismatches, the primary consequence is lower wages than would be earned if individuals were better matched in the labor market. However, a minority of the identified mismatches appear to be "involuntarily uninsured" workers who would gain insurance if they were to find a better match. Extrapolating from the analysis sample, these involuntarily uninsured workers and their uninsured dependents may represent up to one in six uninsured individuals in the United States.