The Effect of Mandatory Employer-Sponsored Insurance (ESI) on Health Insurance Coverage and Employment in Hawaii: Evidence from the Current Population Survey (CPS) 1994-2003

The purpose of this study is to examine the impact of Hawaii’s mandatory employerprovided health insurance on insurance coverage and employment structure in Hawaii. We hypothesize that mandated employer-sponsored health insurance has three effects on health insurance coverage and the labor market. First, it increases employer-provided health insurance coverage for full-time workers. That is, persons employed more that 20 hours per week. Second, it changes the distribution of equilibrium employment by hours worked as some employees seek and employers offer part-time employment to avoid the mandated benefit. Third, people who are not matched with full-time jobs with employerprovided health insurance will switch to other types of insurance, such as publicly provided health insurance or spousal military benefits, as an optimal response. Our empirical evidence generally supports all three hypotheses. First, private employmentbased insurance coverage for full-time workers is more prevalent in Hawaii than the U.S. overall. Second, there is substantial avoidance of the employer-mandate in Hawaii by skirting the 20 hour rule. Third, switching to other types of insurance is significant compared to the other states and the U.S. overall.