Older Workers Prioritize Retiree Health Insurance Over Pension Benefits, Rhode Island Study Reveals
A study conducted by the Center for Retirement Research at Boston College, based on a natural experiment in Rhode Island in 2008, indicates that older state workers value retiree health insurance (RHI) significantly more than pension benefits. The 2008 reform in Rhode Island presented retirement-eligible state employees, averaging 55 years old, with a choice: retire immediately to retain enhanced RHI or continue working to accrue additional pension benefits and salary, but with less generous RHI. The analysis found that these workers valued an additional dollar of RHI twice as much as an additional dollar of pension benefits. This high valuation suggests a greater concern among older workers for insuring against future healthcare costs compared to protecting against longevity risk. The study utilized an instrumental variables approach, using the reduction in benefits caused by the reform as the source of variation in RHI, to estimate the excess retirements triggered by the sudden drop in RHI benefits. This...
