The Impact of Job Displacement on Employer Based Health Insurance Coverage

We analyze the effect of job displacement on the probability that employer based health insurance is made available to workers. Using fixed and random effects logit models, we do find that displacement is associated with a lower probability of having access to an employer based health insurance plan. Overall this penalty is quite small (between 2 and 3 percentage points), but it becomes substantial (about 16 percentage points) for displaced workers who have been with the current employer for less than 6 months. While we do not find evidence that the penalty associated with being displaced has worsened in recent years, we do find that employers respond to economic hardship by cutting back on fringe benefits.