Do minimum wage laws affect employer-sponsored insurance provision?

Area of Science:

• Health Economics
• Labor Economics
• Public Health Policy

Background:

• Minimum wage laws are a key policy lever affecting labor costs.
• Employer-sponsored health insurance is a primary source of healthcare access for many workers.
• Previous research suggests potential trade-offs between wages and non-wage benefits.

Purpose of the Study:

• To investigate the impact of state minimum wage hikes on employer health benefit provisions.
• To analyze how these changes affect the offering of health insurance and plan characteristics.
• To understand the subsequent effect on employee uninsurance rates.

Main Methods:

• Utilized longitudinal data from the Medical Expenditure Panel Survey - Insurance/Employer Component (2002-2020).
• Employed difference-in-differences regression models to assess changes in employer-sponsored insurance.
• Analyzed the relationship between state-level minimum wage changes and employer benefit offerings over time.

Main Results:

• A $1 increase in minimum wage correlated with a 0.92 percentage point decrease in employers offering health insurance.
• This effect was more pronounced in small businesses and those with a higher proportion of low-wage workers.
• A $1 minimum wage increase was associated with a 1.83 percentage point rise in plans with deductibles; other benefit features showed no consistent changes.

Conclusions:

• State minimum wage increases can lead to reductions in employer-provided health insurance, especially among vulnerable employer types.
• While benefit offerings may shift (e.g., higher deductibles), overall uninsurance did not increase, suggesting a potential shift to public insurance like Medicaid.