Unbiased Analysis of Today's Healthcare Issues

Can Health Care Reform Save the Economy?

Written By: Jason Shafrin - Mar• 27•09

In the run-up of real estate and stock market prices, demand for labor in the construction, real estate, finance industry was high.  With the drastic drop in real estate and stock market prices, the demand for loan officers, construction workers and investment bankers has dropped.  Individuals who have been laid must find a new job.  Those who are currently in dead-end jobs need to find positions in growing industries and cities.  For instance, a construction worker who used to build McMansions in the suburbs should be looking to move to new area where jobs are available working on government infrastructure projects.

Nevertheless, many employees in dead-end jobs may decide to try to keep these jobs.  Why?  One reason workers keep jobs they do not like is that they do not want to lose health insurance coverage for their family.  Moving to a new city can mean a temporary lapse of health insurance.  Further, new employers often do provide health insurance for a few months.  

The phenomenon that workers remain at sub-optimal jobs to maintain their health insurance is known as “job lock.”  I wrote a brief literature review about job lock 3 years ago.

A recent Economist article has revisited the problem of job lock as well:  

“…most Americans still get their health insurance from their jobs.  This makes it hard for anyone with a sick child to quit and start a new firm. It also makes it harder to switch jobs, despite a law helping employees to stay in company plans for 18 months after they leave. Scott Adams of the University of Wisconsin-Milwaukee found that married men with no alternative source of insurance were 22% less likely to switch jobs than those who, for example, could get covered by their wife’s employer.

Tying health care to a job can tie people to jobs they hate. Gerry Stover, who now runs a doctors’ group in West Virginia, recalls a time when his wife was pregnant and he couldn’t get health insurance at a private firm. He became a prison guard. As a public employee, his family was covered. But the job was neither pleasant nor a good use of his talents.”

While employer-provided health insurance is a good place to pool individuals of different health risks, tying health insurance to your employer may impede labor mobility and slow economic growth.

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5 Comments

  1. Greg D says:

    I had never thought about disassociating health care insurance from your job, it is certainly an idea worth mentioning and could be pursued. Several insurance companies out there have morphed from covering a select group of individuals to pretty much anyone out there, and seem to do a pretty good job of it (e.g. efficient and low cost). The largest one that I can think of is GEICO (Government Employees Insurance Company). Also Electric Insurance (started out covering only GE employees). Is there an efficient health care insurance company with high customer satisfaction that could go from covering only the employees of one entity (e.g. GE employees or government employees) and offer group insurance to the public?

  2. […] (03/28/09): Yesterday’s posting on Healthcare Economist, a very incisive economics-meets-healthcare blog authored by up-and-coming economist Jason Shafrin, […]

  3. […] via Healthcare Economist · Can Health Care Reform Save the Economy?. […]

  4. ggg says:

    Individuals who have been laid must find a new job.

    snicker snicker

  5. Not sure what needs to be done but something has to happen or we will all be unable to afford health care. Maybe a start would be to take the write off for advertising from drug companies and we will get rid of the TV ads as well
    Sparky Flavored Coffee Drinker

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