Employer-Sponsored Health Insurance and the Gender Wage Gap

During prime working years, women have higher expected healthcare expenses than men. However, employees' insurance rates are not gender-rated in the employer-sponsored health insurance (ESI) market (most likely as a result of legal restrictions against doing so). Thus, employers who offer insurance have an incentive to favor men in hiring unless women's wages adjust to account for their higher average health costs. We show that female employees suffer a larger wage gap relative to men when they hold ESI: our results suggest that after controlling for a rich set of individual and job characteristics, the wage gap for women is approximately twice as large among workers who obtain ESI through their own employer. The gender wage gap does not vary with other fringe benefits for which expected costs are roughly equal for men and women. The additional pay gap for a full-time female worker with ESI is on the order of the expected difference in healthcare expenses between women and men. Our results imply that in addition to women who obtain insurance in the individual market, women who obtain healthcare coverage through their employer pay more for their insurance (in the latter case through lower wages).