Working Paper: NBER ID: w11303
Authors: Jay Bhattacharya; M. Kate Bundorf
Abstract: The incidence of obesity has increased dramatically in the U.S. Obese individuals tend to be sicker and spend more on health care, raising the question of who bears the incidence of obesity-related health care costs. This question is particularly interesting among those with group coverage through an employer given the lack of explicit risk adjustment of individual health insurance premiums in the group market. In this paper, we examine the incidence of the healthcare costs of obesity among full time workers. We find that the incremental healthcare costs associated with obesity are passed on to obese workers with employer-sponsored health insurance in the form of lower cash wages. Obese workers in firms without employer-sponsored insurance do not have a wage offset relative to their non-obese counterparts. Our estimate of the wage offset exceeds estimates of the expected incremental health care costs of these individuals for obese women, but not for men. We find that a substantial part of the lower wages among obese women attributed to labor market discrimination can be explained by the higher health insurance premiums required to cover them.
Keywords: Obesity; Healthcare Costs; Wages; Health Insurance
JEL Codes: I1; J7
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| obese workers with employer-sponsored health insurance (I13) | lower wages (J31) |
| higher medical costs associated with obesity (I10) | lower wages for obese workers with employer-sponsored health insurance (J32) |
| higher health insurance premiums (I13) | lower wages for obese women (J79) |
| obese individuals in firms without employer-sponsored insurance (I13) | no wage offset (J31) |
| morbidly obese individuals (I12) | greater wage penalties than mildly obese individuals (J31) |
| costs of health insurance (I13) | wage offset (J31) |
| obese bear the full cost of incremental medical care (H51) | lower wages for obese with employer-sponsored insurance (J32) |