Effects of Disability-Based Underwriting Prohibitions on the Labor Market Ping Wang St John’s University ARIA Annual Meeting August 7, 2006, Washington D.C.

2 Sources of Health Insurance Coverage For Non-elderly Americans

3 Variation Across Firms Large firms are more likely to self-insure Small firms buy insurance Risk Underwriting –Large firms: almost none –Small firms: common

4 Group Coverage and Group Size Workers of firms with 500+ employees Workers of firms with 25- employees Offered health insurance 91.6%52.1% Covered by employer-plan >67%33.8%

5 Questions of Interest Consequences of Underwriting Underwriting Prohibitions Effects on Health Insurance Market (Browne and Frees 2004) Effects on Labor Market ??

6 Effects of Health Insurance on Labor Market Moffitt and Wolfe (1990) Gruber and Krueger (1991) Kaestner and Simon (2002) Kapur (2003, 2004)

7 Disability Regulation and Labor Market DeLeire (2000) finds that ADA (American with Disability Act) is associated with –Lower employment rate of disabled men –No change in wages of disabled male workers

8 Current Project The effects of underwriting prohibitions on Likelihood of employment Firm size when full-time employed Wages of small firm employees

9 Sources of Data Current Population Survey (CPS) Sample: single-person households years old, unmarried. Period: State Statutes Bureau of Economic Analysis (BEA)

10 Small Group Disability-Based Underwriting Regulations

11 Models and Fitted Responses Firm size: Small - fewer than 10 workers. Medium - 10 to 24. Large - 25 and more.

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14 Employment Status Test: Base Model

15 Probabilities of Employment for Selected Subgroups Probabilities Subgroup Full-timePart-timeUnemployed Able-male Able-female Disabled male Disabled female

16 Employment Status Test: Models with Law Variables

17 Employment Status Test: Estimates of Law Variables Probabilities for Able-Male Prohibition Law Full-timePart-timeUnemployed In Effect Not in Effect

18 Firm Size Test: Descriptive

19 Firm Size Test: Base Model

20 Firm Size Test: Estimates of Law Variables Probabilities for Employed Able-Female Prohibition Law LargeMediumSmall In Effect Not in Effect

21 Wages Test: Descriptive Note: All coefficients are significant at 5% level except those denoted by a *.

22 Table 20. Effects on Wages of Small-firm Workers

23 Remark About Wage Test The able-bodied earns $2000 more if their state has the law in effect, the increase is in line with Average employer cost for offering health insurance was $2268

24 Conclusions Disability-based underwriting prohibitions do affect the labor market Effects on able-bodied employees -- they are more likely to work for small firms -- they earn more

Questions and Suggestions? Thanks

26 Descriptive Statistics

27 Group Insurance Coverage versus Wage

28 Note: All9196 contains all observations for the period of 1991 through 1996, with the age of the individual between 16 and 64. Single9196, a subset of all9196, consists of single-person households, providing that person is unmarried.

29 Note: The means of state level variables are calculated using the number of observations in each state as the weight.