Recorded presentation

Kaan Tunceli, PhD, Center for Health Services Research, Henry Ford Health System, One Ford Place, Suite 3A, Detroit, MI 48202, 313-874-5485, ktuncel1@hfhs.org, Pamela Short, PhD, Department of Health Policy and Administration, The Pennsylvania State University, 15 N. Henderson Building, State College, PA 16801, and William Greene, PhD, Department of Economics, Leonard N. Stern School of Business, New York University, 44 West Fourth Street, 7-78, New York, NY 10012.

Goals: (1) To estimate the effect of planning to retire early on access to employer-provided retiree health insurance (ERHI); and (2) to produce a consistent estimate of the effect of ERHI on the probability of early retirement, allowing for the possibility that access to retiree health insurance is an endogenous variable.

Methods: We utilized a panel study design with three sequential observations at different points in time. The retirement model is specified with three sequential equations predicting retirement expectations in 1992, access to retiree health insurance in 1996, and retirement between 1996 and 2000. Demographic and socioeconomic characteristics of spouses are included in all three equations. In contrast to most previous studies, we used multi-equation estimation techniques (bivariate and trivariate probit) to account for simultaneities involving the three dependent variables, in addition to a conventional univariate probit technique.

Results: The results vary significantly by estimation technique. Planning to retire early increases access to ERHI in the bivariate and trivariate models (ME: 0.20, p<0.01), while it does not in the univariate model. The effect of access to ERHI on early retirement is positive and significant in all three models. However, the effect is larger for the bivariate and trivariate models (ME: 0.19, p<0.01) compared to the univariate model (ME: 0.05, p<0.10). The trivariate model provides evidence that all three correlation coefficients between error terms in the structural model are significant (p < 0.01).

Conclusions: Estimation techniques that account for endogeneity and the correlations between the error terms in the structural model produced larger effects of retiree health insurance on early retirement than in most previous studies. This implies that previous research using mostly univariate models might have underestimated the effect of retiree health insurance on retirement. One important implication for public policy is that policy initiatives such as Medicare buy-in and health insurance tax credits that increase access to retiree health insurance are likely to have larger effects on retirement decisions than previous research has suggested. In other words, the unintended effects on labor force participation of policies that increase access to retiree health insurance might be greater than anticipated.

Learning Objectives:

(
• To understand the endogeneous relationship between access to employer-provided retiree health insurance and early retirement decisions (
• To learn the effect of the endogeneity on the estimates

Keywords: Employer-Provided Health Insurance, Economic Analysis

Presenting author's disclosure statement:
I do not have any significant financial interest/arrangement or affiliation with any organization/institution whose products or services are being discussed in this session.

Recorded presentation