'Competition' among employers offering health insurance

Most employees contribute towards the cost of employer-sponsored insurance, despite tax laws that favor zero contributions. Contribution levels vary m arkedly across firms, and the average contribution (as a percentage of the premium) has increased over time. We offer a novel explanation for these fa cts: employers raise contribution levels to encourage their employees to ob tain coverage from their spouses' employer. We develop a model to show how the employee contribution required by a given firm depends on characteristi cs of the firm and its work force, and find empirical support for many of t he model's predictions. (C) 2000 Elsevier Science B.V. All rights reserved.