Asymmetric Effects of Marital Separation on Health Insurance among Men and Women

I. INTRODUCTION Most private health insurance in the United States is provided through the workplace. Cutler and Zeckhauser (2000) reported that more than 90% of privately insured adults receive coverage as a fringe benefit from their employers. This feature of health insurance markets raises the possibility that individuals who separate from their jobs might also lose insurance coverage. The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) attempted to protect people experiencing employment termination from the possibility of losing employer-provided insurance. The link between mandated coverage laws and job separation has been explored in several articles (Berger et al., 1999; Gruber and Madrian, 1997; Madrian, 1998). In addition to job loss, marital separation might also place individuals at risk of insurance loss, especially for those enrolled as dependents in their spouses' policies. Tabulations from the Medical Expenditure Panel Survey (MEPS) indicate that among privately insured married individuals between the age of 18 and 59 yr, approximately 79% of couples are characterized by an insurance arrangement in which only one spouse, usually the husband, is a policyholder and the other is covered under the plan. This coverage structure places the spouse who is not the policyholder, usually the wife, at risk of losing health insurance in the event of marital separation. In addition to COBRA's protection for employment termination, the law also includes provisions that attempt to protect spouses who experience marital separation from potential insurance loss. Unlike the subject of employment termination, there is virtually no published research about the effect of marital separation on insurance loss. This article seeks to determine whether spouses who experience marital separation are at greater risk of insurance loss than those who remain married. Data come from the MEPS, a large nationally representative survey of health-care utilization and insurance status. The empirical analysis focuses on a sample of employed married individuals between the age of 19 and 59 yr, who remain in the survey for 24 mo. The analysis attempts to control for confounding factors that might simultaneously affect the probability of marital separation and insurance loss. The relationship between job displacement and insurance loss has been an active area of research. Monheit et al. (1984) and Klerman and Rahman (1992) conclude that job loss is not a major source of insurance loss because few unemployed individuals had insurance at their previous jobs. Podgursky and Swaim (1987), on the other hand, find that long-term job displacement leads to large reductions in rates of insurance coverage. Likewise, Berki et al. (1984), Gold et al. (1984), Bazzoli (1986), and Gruber and Madrian (1997) find that employment separation is associated with insurance loss or large reductions in coverage. Insurance loss, as well as the threat of insurance loss, is an important public policy concern. First, without health coverage, individuals losing their jobs potentially face high out-of-pocket expenses for health care, which suggests that the cost of necessary care might be prohibitive for some job separators. A second concern is the relationship between the threat of insurance loss and job lock. If leaving one's job is associated with insurance loss, a worker who might otherwise find it optimal to leave the workforce or seek new employment might be "locked" into a suboptimal job in order to remain covered by an employer's group plan. Therefore, it is not only insurance loss but also the threat of insurance loss that might distort employment decisions. Gruber and Madrian (1997) provide evidence that continuing coverage mandates, such as COBRA, reduce job lock by increasing insurance mobility. Despite widespread interest among policy researchers in the effect of job displacement on insurance loss, there is little focus in the literature on the insurance implications of a married person losing his or her spouse. …