The employer-sponsored life insurance (ESLI) market is susceptible to adverse selection due to community-rated premiums, guaranteed issue coverage, and the existence of an individual market. Using payroll and healthcare claims data from a large university, we find that employees with worse health are more likely to elect coverage causing adverse selection in supplemental ESLI. Nonetheless, we find employees typically do not increase coverage following a severe illness even when they can without providing evidence of insurability. Furthermore, demand estimation shows employees are not price-sensitive and estimated increases in premiums from adverse selection are unlikely to cause significant welfare loss.

Original languageEnglish
Pages (from-to)911-941
Number of pages31
JournalEconomic Inquiry
Issue number4
StateAccepted/In press - 2023

Bibliographical note

Funding Information:
The project was supported by the National Center for Advancing Translational Sciences, National Institutes of Health, through Grant UL1TR001998. The content is solely the responsibility of the authors and does not necessarily represent the official views of the National Institutes of Health. We thank Bibek Adhikari, David Agrawal, Tom Ahn, Chris Bollinger, Charles Courtemanche, Anthony Creane, John Garen, Kristine Hankins, Jeremiah Harris, William Hoyt, Conor Lennon, Frank Scott, and James Ziliak for helpful comments and Matthijs Schendstok and Lydia Tetteh for research assistance. We also thank the co‐editor and anonymous referees for their helpful suggestions.

Publisher Copyright:
© 2023 Western Economic Association International.


  • adverse selection
  • employer-sponsored insurance
  • life insurance

ASJC Scopus subject areas

  • General Business, Management and Accounting
  • Economics and Econometrics


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