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rates for workers in firms with different characteristics and in different states and years, and

computed the tax-price of insurance. Gruber (2001) estimated a tax-price elasticity of worker

eligibility for insurance (that is, a change in the probability that a worker would be both offered

and eligible for coverage, with respect to a change in the tax-price of coverage) equal to at least –

0.6. Gruber and Lettau (2004) found a smaller elasticity (-0.25) for insurance offer and a larger

elasticity (–0.7) for insurance spending conditional on offer. Both studies consider firms of all

sizes, but they rely on different sources of information about employer offer.3

Some researchers have estimated employer demand for insurance by imputing the insurance

premium available to employers based on premium data from firms that offer insurance or by

asking firms how they would respond to various hypothetical prices in order to estimate a

demand function. Most of these studies focus on small employers, and are discussed in the

section below.


Subpopulation Differences

Because small employers are the least likely to offer insurance coverage to their employees,

many studies focus solely on small employers or compare the elasticity of offer in small firms to

that in larger firms. These studies usually define small firms as those having fewer than 50

employees, as did the Health Insurance Portability and Accountability Act (HIPAA), but some

define 100 employees as the cut-off point, reflecting the firm-size categories available in some


(continued) workers, for example, in May 1988 and April 1993. Many researchers have used matched data between the March CPS and these supplement data to study employer offer decision.

3 Gruber (2001) used workers’ self-reported offer of coverage, and Gruber and Lettau (2004) used administrative data on firm offering status.


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