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CBO: Effects of Changes to the Health Insurance System on Labor Markets

July 13, 2009


This report looks at the various ways changes to the American health insurance system could affect the labor market.

In the United States, health insurance coverage is linked to employment in ways that can affect both wages and the demand for certain types of workers. That close linkage can also affect people's decisions to enter the labor force, to work fewer or more hours, to retire, and even to work in one particular job or another.

Changes to the health insurance system could affect labor markets by changing the cost of insurance offered through the workplace and by providing new options for obtaining coverage outside the workplace. For example:

  • Requiring employers to offer health insurance-or pay a fee if they do not-is likely to reduce employment, although the effect would probably be small.
  • Providing new subsidies for health insurance that decline in value as a person's income rises could discourage some people from working more hours.
  • Increasing the availability of health insurance that is not related to employment could lead more people to retire before age 65 or choose not to work at younger ages. But it might also encourage other workers to take jobs that better match their skills, because they would not have to stay in less desirable jobs solely to maintain their health insurance.

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