Gerard Russo, Ph.D. Sang-Hyop Lee, Ph.D. Lawrence Nitz, Ph.D. Thamana Lekprichakul, Ph.D.

1. The Effect of Mandatory Employer-Sponsored Health Insurance on the Use of Part-Time versus Full-Time Workers: The Case of Hawaii. Gerard Russo, Ph.D. Sang-Hyop Lee, Ph.D. Lawrence Nitz, Ph.D. Thamana Lekprichakul, Ph.D. Rui Wang, Ph.D. Candidate University of Hawai`i at Mānoa Abdul Jabbar, Ph.D. International Islamic University, Islamabad 24 June 2006

2. State Policy and Health Insurance CoverageSaturday, 24 June 2006 10:00-11:15 AMPresentation 3: “The Effect of Mandatory Employer-Sponsored Health Insurance on the Use of Part-Time versus Full-Time Workers: The Case of Hawaii.” Presenter: Gerard Russorusso@hawaii.edu State Health Research and Policy Interest Group Meeting June 24, 2006 10:00 AM—4:00 PM Washington State Trade & Convention Center

3. Institutional Partners & Collaborators • Health Resources & Services Administration, State Planning Grant Program • Hawaii State Department of Health • Hawaii Institute for Public Affairs, Hawaii Uninsured Project • Hawaii Health Information Corporation • Robert Wood Johnson Foundation, AcademyHealth, State Coverage Initiative • University of Minnesota, State Health Access Data Assistance Center • University of Hawaii, Social Science Research Institute

4. Prepaid Health Care Act of 1974 (Mandatory ESI) • PHCA of 1974: requires all private-sector employers to provide health insurance to full-time employees (i.e., 20+ hours per week) • Exempt workers: • Part-time workers working less than 20 hours per week • Low-earning workers earn less than 86.67 times minimum wage per month (2006: $6.75 x 86.67=$585; 2007: $7.25 x 86.67=$628.) • Government employees, self-employed, commission-only workers, seasonal workers, family workers • Collective bargaining contracts are exempt. • No other State has implemented mandatory ESI • Employee Retirement Income Security Act (ERISA) generally prohibits States from mandating economy–wide employment-based health and retirement benefits. The Federal government reserves that right. • Hawaii has a Congressionally granted ERISA exemption for the PHCA 1974 only.

5. Research Program on Labor Market Effects of Mandatory ESI • Health Insurance Coverage • Labor Force Utilization • Wages • Job Mobility

6. Research Question • What is the impact of mandatory employer-sponsored insurance (ESI) on the distribution of employees by hours worked?

7. Hypotheses • Mandated ESI increases the proportion of part-time workers as the labor market avoids the regulation. • Thurston (1997) • Firms utilize full-time employees more intensely because the cost of mandated ESI is fixed per employee. Low marginal cost of an hour of labor among extant employees and declining average cost per hour. • Cutler & Madrian (1998)

8. Data Sources CPS • Current Population Survey (CPS) • Annual Social and Economic (ASEC) Supplement (March Demographic Supplement) • Basic Monthly Survey

9. Measure of Hours Worked: Current Population Survey • Usual hours worked per week at main job held last week. • Available for all workers 1994-2005.

10. Hawaii Adults Age 19-64by Sector of Employment

11. Probability Density of Non-Collective Bargaining Private-Sector Employees by Hours Worked Per Week: CPS ASEC 1995-2005 .3 .2 Density .1 0 0 20 40 60 80 100 Hours Worked Hawaii U.S. 49 States & DC sample size=528,284 Hawaii sample size=6,450

12. Percent Distribution Private-Sector Employees by Hours Worked: CPS March Supplement 1988-2005.

13. Percent of Private Sector Employees Working 1-19 Hours: CPS March Supplement 1988-2005

14. Percent of Private Sector Employees Working 20-34 Hours: CPS March Supplement 1988-2005

15. Percent of Private Sector Employees Working 35+ Hours: CPS March Supplement 1988-2005

16. SAMPLE SIZE: CPS Basic Monthly Survey 1994-2005 (Hours Worked At Main Job, 1-99)

17. Percent Distribution Non-Collective Bargaining Private-Sector Employees by Hours Worked: CPS Basic Monthly Survey 1994-2005.

18. Percent of Non-Collective Bargaining Private-Sector Employees Working 1-19 Hours: CPS Basic Monthly Survey 1994-2005

19. Percent of Private Sector Employees Working 20-34 Hours: CPS Basic Monthly Survey 1994-2005

20. Percent of Private Sector Employees Working 35+ Hours: CPS Basic Monthly Survey 1994-2005

25. Why is the effect small? • Regulation is non-binding for most employers and employees. • Noncompliance? 2%-5%.

26. Percent of Population Insured by Type of Insurance, CPS 1994-2004:11-Year Average

27. Why is ESI so pervasive nationwide? • Lack of adverse selection • Economies of scale in administration • Favorable tax treatment of insurance premiums

28. Percent of Private Establishments that Offer Health Insurance by Average Wage of Work Force: Hawaii and United States, MEPS–IC 2003 SOURCE: Agency for Healthcare Research and Quality, Center for Financing, Access and Cost Trends, Medical Expenditure Panel Survey-Insurance Component.

29. Hawaii vs. California: Wage Quartile I

30. Hawaii vs. California: Wage Quartile II

31. Hawaii vs. California: Wage Quartile III

32. Hawaii vs. California: Wage Quartile IV

33. Distribution of Uninsured Private-Sector Employees by Hours Worked: Five Year Average CPS 2001-2005 .15 K-density .1 .05 0 0 20 40 60 80 Hours Worked Percent Distribution of Uninsured Workers by Usual Hours Worked per Week at Main Job: Paid Private Sector Employees

34. Further Research: Model-Based Estimates • Controls for Individual Worker Characteristics: • Age, Gender, Education, Race, Marital Status, Health Status, Industry of Employment, Firm/Establishment Size • Controls for State-Specific Macroeconomic Conditions • Unemployment Rate, GSP Growth Rate, etc. • Additional Controls for State-Specific Industrial Structure • Health Insurance Premiums MEPS-IC 1996-2004 • Exploit the Underlying Panel of Workers in the CPS Basic Monthly Survey • Count Data Models, Multinomial & Ordinal Logit

35. Mahalo! This research is funded in part by U.S. Department of Health and Human Services Health Resources & Services Administration State Planning Grant Hawaii State Department of Health.