Why Do Employers Do What They Do? Compensating Differentials
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Employers are the principal source of health insurance for Americans under age 65. Labor economics argues that workers obtain health insurance in this fashion because the insurance is both valuable to them and less costly when purchased through an employer. The reasons for the cost savings are said to be the tax treatment of employer sponsored health insurance, the likely lower claims experience arising from an employed groups's better health status, and the savings arising from lower administrative, marketing and search costs.
International Journal of Health Care Finance and Economics
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