The Impact of Permanent Job Loss on Health Insurance Benefits


This paper investigates the impact of plant closings and permanent layoffs on the
group health insurance coverage for a random sample of workers displaced from
1979-1988. Using data from the 198A, 1986 and 1988 CPS Displaced Worker Surveys
and the March 1989 CPS, I find displaced workers that were re—employed at the
time of the surveys were significantly less likely to have health insurance on
their new job. For all married displaced workers I estimate the overall
probability of HI coverage declined l9 percentage points from .88 to .69. The
probability a married white male lggg health insurance after displacement was
.20. For single displaced workers the probability of health insurance coverage
declined 25 percent from .64 to .48. Single white male workers that had HI
benefits on their displaced job had a .38 probability of losing these benefits
after displacement. Comparable effects were found for females. Less educated
workers and minorities were more likely to lose coverage than white and college
educated workers. I find no evidence that workers who lost health insurance
benefits received higher wages on their new jobs to compensate for the loss. In
fact, a displaced worker that lost health benefits suffered a greater wage loss
than a comparable worker who gained health benefits.

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