The document discusses the relationship between health insurance and the labor market. It begins with background on labor markets and health insurance. It then discusses how health is a form of human capital and that poor health can lead to lower wages and productivity. Health insurance may increase labor force participation by reducing healthcare costs and uncertainty. The document also provides an overview of health insurance in Bangladesh, noting low coverage rates but growing demand. It concludes by discussing how employer-provided health insurance can incentivize firms to employ more productive workers and substitute hours for additional workers.

1. Health Insurance and Labor Market
Developed By :
Group E
Sinthia Islam 07
Afrida Jerin 09
Sadia Islam 12
Faisal Imam 40
Fahmida Akter 60Institute of Health Economics
University of Dhaka

2. Labor Market & Health Insurance
An
Introduction
to
Labor Market:
The labor market refers to the supply
and demand for labor, in which
employees provide the supply and
employers the demand. It is a major
component of any economy, and is
intricately tied in with markets for
capital, goods and services.
It discusses supply and demand are
influenced by domestic and
international market dynamics, as
well as factors such as immigration,
the age of the population, and
education levels. Relevant measures
include unemployment, productivity,
participation rates, total income and
GDP.
Health Insurance:
Health insurance is a type of
insurance coverage that pays for
medical and surgical expenses
incurred by the insured. Health
insurance can reimburse the insured
for expenses incurred from illness or
injury, or pay the care provider
directly. It is often included in
employer benefit packages as a
means of enticing quality employees.
The cost of health insurance
premiums is deductible to the payer,
and benefits received are tax-free.

3. • Health is a “Human Capital” <Becker
(1964) drew an analogy between
``investment'' in health capital and
investment in other forms of human
capital such as education. This model was
further developed by Grossman (1972)>
• There are effects of health on wages,
earnings, and hours
- There is a great deal of literature
documenting a positive relationship
between various measures of health and
either wages or income. For example,
Strauss and Thomas (1998) report that in a
sample of US white males aged 27±35 from
the National Longitudinal Survey of Youth,
the elasticity of wages with respect to
height is 1. In developing countries, the
relationship is even stronger. In Brazil they
report that the same elasticity is 3 or 4
even when education is controlled for.
Effects of health on wages,
earnings, and hours & Evidence
regarding health and attachment
to the labor market
• poor health is related to lower
wages. poor health may lower
productivity, resulting in lower
wages; second, the employer costs
of accommodating a worker in
poor health may be passed on in
the form of lower wages; and
third, those in poor health may be
subject to discrimination.
• it may also reduce effective
time endowments and affect the
marginal rate of substitution between
goods and leisure. Thus the effects of
health on labor force participation are
theoretically ambiguous, although
most research seems to assume that
poor health will decrease
participation.

4. Health Insurance As a Mandated Health Benefit &
Compensating Differentials

5. Roles of Health Insurance on Labor market: Fast Facts
• health affects labor market outcomes both through its direct effects on
productivity, and indirectly by altering tradeoffs between income and leisure. Here
is some possible two roles for health insurance:
• First, if health insurance reduces the cost of health care, and if health care
improves health, then health insurance should affect labor market outcomes by
improving health. This effect may be difficult to pin down however, if investments
in health care today have payoffs over a long period.
• Second, health insurance may change the utility associated with leisure. On the one
hand, people may enjoy leisure more if they are healthier. On the other hand, risk
averse consumers will enjoy leisure less if leisure brings with it more uncertainty
about health care expenditures. Thus, if health insurance is tied to employment, it
is likely to increase labor force participation, while if it is not, it may well reduce
labor force participation.

6. Health Insurance Provision in Bangladesh
• Health insurance is no longer any foreign terminology for Bangladesh but a large
number of people are out of health insurance coverage
• People who are under the health insurance coverage most of them are covered by
their employers
• It is categorized as B2B Business model where large employers sign up with insurance
provider to cover the employees of their firms as a part of their benefit package.
• A B2C model for health insurance where a person or a household can sign up directly
with the insurance provider, which is practically non-existent in BD but several NGOs
have launched a variety of health insurance programs which are aimed largely to
protect micro-credit borrowers. Collectively this segment too is small.
• Despite 15 years of existence ,health insurance only account for 0.2% of total health
care expenditure. As of late 2013, only 12 out of 62 insurance companies offered
some basic forms of health insurance, covering less than 500,000 individuals, a
meager 0.3% of population.
• But the per capita income of Bangladesh has been growing at an impressive rate of 6%
per capita health care expenditure is mounting at a rate of 11%.

7. Health Insurance Provision in Bangladesh
• As a result 4.7 million people are pushed back to poverty, every year due to health
shock alone. In 2005 EQUITAP paper reports, while individual savings can create
opportunities to weather such crisis or emergencies it does not come easy for many
people, especially expenditure grows at a higher rate in relation to income.
Bangladesh spends 3.4% of it’s GDP on health, of which public health spending
comprises less than 1%. In countries with low government spending on health,
private-out-of-pocket tend to dominate ,likewise in BD, OOP payments account for a
good 2.2% of GDP.
• The demand for health insurance remains weak at the individual level, since the
majority of buyers today are corporates institutions. Also most of the health insures
only cover in patient care, an insufficient offering that further impedes market
demand on the supply side of the equation, the inadequate risk pooling results in high
claim ratio, and thus low profitability is a major deterrent for new health insurance
venture.

8. Health Insurance Provision in Bangladesh
• Recently the government of people’s republic of Bangladesh is thinking about
ensuring health insurance. Recently garments factory has started this process and the
presence of labor massively increased
• Specialists are saying it creates a proper situation of health insurance for lower waged
labors
-At “Gilarchar” in “Gazipur” a garment factory named “Vintage Denim” has started this
initiative from July, 2016. Under this health insurance about 18000 labors are getting
health benefits. At this project “A K Memorial Hospital” is giving health care benefits to
the labor. The donor agency “DFID UK” is giving financial help. There is a health card for
every worker for getting treatment and their children under 18 will also be benefitted by
this initiative.
-The “Health Economics Unit” of Ministry of Health is trying to open health insurance for
all the people of Bangladesh. They are researching for this and also have taken a model
project.

9. Health Insurance Provision in Bangladesh
• The directorate general of Health Economics Unit Mr. Asadul Alam said that –
“ The advance paying for the treatment has not even formed in the culture of the country
but the initiative of vintage denim will create a better position for the health insurance”
• According to the documented resource , Selim Mridha – a worker of this garment
confirmed that his income is nearly 10000/= BDT and in a recent surgery in A.K
Memorial hospital he didn’t have to pay any money, his wage was constant.

10. Health Insurance
and the Structure
of Employment
A final aspect of the labor market that may be impacted by the institutions for health
insurance provision is the firm's demand for labor input. There are two salient features of
health insurance provision that are particularly relevant. First, health insurance is a fixed cost
of employment and not a variable cost. Employer expenditures on health insurance do
not increase when hours increase, and they do not increase when compensation increases.
The second important feature of health insurance is that, as is the case with employer
provision of other benefits such as pensions, employer provision of health insurance must
satisfy IRS non-discrimination rules in order to receive favorable tax treatment. These
non-discrimination rules basically stipulate that if the firm is to provide health insurance, it
must make it widely available to almost all employees ((that is, the firm cannot provide a
benefit which receives favorable tax treatment if the benefit is only made available to or
utilized by a select group of workers).
That health insurance is a fixed cost gives firms an incentive to try and amortize
this fixed cost over as many units of output as possible. The firm can do this in two ways.
The first is to employ higher productivity workers.
The second way that firms can amortize their fixed health insurance costs over as many
units of output as possible is to substitute hours for workers in allocating labor input
between the number of workers to employ and hours per worker. This is because when
the firm hires an additional worker, it must pay both the fixed cost of providing health
insurance and the marginal compensation costs associated with soliciting the services of
an additional worker. When it increases the hours of an existing worker, however, it only
incurs the marginal compensation costs because the health insurance costs have already
been incurred.

11. Key Summary: Health Insurance in Labor Market
There is an important relationship between labor market outcomes and the institutions
and rules governing health insurance provision. A large body of evidence supports the
notion that health insurance affects employment outcomes by giving individuals who rely
on their current employer for health insurance an incentive to remain employed, and by
giving individuals with other sources of health insurance provision less reason to
participate in the labor market
Poor health reduces the capacity to work and has substantive effects on wages, labor force
participation, and job choice. Health insurance, too, has important effects on both labor
force participation and job choice, although the link between health insurance and wages
is less clear. Health insurance may also have significant effects on the firm's demand for
labor, but little research has been conducted in this area. Of course, health, health
insurance, and labor market outcomes are likely to be connected in more complicated
ways than have been explored in this paper and in the literature to date. An important
question which we have not addressed is how health insurance and medical care
expenditures impact health. Given the substantial fraction of GDP now devoted to health
care, an important measure of the value of these expenditures is the extent to which they
increase the productive capacity of individuals.

12. Thank You!