The role of employee age in employers’ decisions surrounding health insurance is a topic of long-standing public-policy concern. This study quantifies the impact of workforce age structure on health insurance premiums by linking administrative earnings records from the Longitudinal Employer-Household Dynamics data set to rich plan-level data from private employers surveyed by the Medical Expenditure Panel Survey–Insurance Component. The baseline results indicate that a 10 percentage-point increase in the share of a firm’s workforce ages 50 and older is associated with 4.3% higher single-coverage premiums, an estimate that varies significantly by firm size, managed-care provision, and plan funding mechanism. I further explore how the age-premium relationship changes under community rating policies that limit the degree to which insurers can vary small-group premiums according to the age and health of the workforce. Using the implementation of the Affordable Care Act’s community ratings provisions in 2014 as a quasi-experimental exogenous shock, I find that the relationship between workforce age and small-group premiums is mitigated under age- and health-focused ratings policies. Finally, I examine the effects on health insurance premiums of Medicare acting as first payer for the smallest firms. Results suggest that the effect of age on premiums is reduced by 25% when Medicare acts as first payer.
Davis, Owen F. (2023). “Older Workers and Employer-Sponsored Health Insurance Premiums: Evidence From Linked Administrative and Survey Data.” Working paper.