Why do people stay in jobs for health insurance?

People stay in jobs for health insurance because losing employer coverage can make any other career move — a better job, a move, starting a business — financially too risky to attempt. Economists call this “job lock,” and it is one of the most measurable labor-market distortions in the U.S. data.

The current scale of the problem is larger than many people realize. A 2024 Commonwealth Fund survey found that 24% of U.S. workers — roughly 23 million people — stayed in a job they wanted to leave specifically to keep their health insurance. Of those, 41% reported staying in a job that was a poor fit, 38% stayed in a job they would otherwise have left for a different role, and a substantial share said they had delayed retirement or other plans because switching jobs would mean changing coverage. The share reporting job lock rose roughly 8 percentage points between 2022 and 2024, which suggests the problem is getting worse, not better, as employer premiums continue to climb.

The mechanism is straightforward. Employer-sponsored health insurance in the U.S. is heavily subsidized relative to buying equivalent coverage on the individual market — partly because employers can negotiate group rates, partly because employer contributions are not taxed as employee income. KFF’s 2024 Employer Health Benefits Survey found that the average annual premium for family coverage was roughly $25,000, of which employers paid about $19,000 and workers paid the rest through payroll deduction. The same coverage purchased on the individual market often costs 30–60% more for the same benefits, and self-employed people buying their own coverage through ACA marketplaces face the full sticker price (sometimes offset by premium tax credits, sometimes not).

The result: a worker who leaves a job to start a business or take a role without benefits can see their personal health-care costs jump by $5,000–$15,000 a year, even before accounting for deductible, copay, and network changes. For families with ongoing medical needs — a chronic condition, a planned surgery, regular prescriptions — the risk isn’t just higher premiums; it’s losing access to specific doctors, specific drugs, or specific treatments that the new plan doesn’t cover.

Job lock has well-documented downstream effects:

• Reduced entrepreneurship. Multiple studies find that people without access to affordable individual-market coverage are significantly less likely to start businesses. The risk of being uninsured for six to twelve months while a new venture gets off the ground is a real barrier.
• Reduced geographic mobility. Moving for a job often means changing carriers and networks. Workers tied to specific providers (especially in rural areas with limited options) are less likely to relocate.
• Reduced bargaining power. Workers with valuable employer benefits may stay in roles that are bad fits because the value of the benefit bundle exceeds what a higher-paying alternative without benefits can match.

What the policy levers do and don’t fix:

• The Affordable Care Act reduced job lock significantly after 2014 by making individual-market coverage guaranteed-issue and capping out-of-pocket costs. But employer coverage still has a structural tax advantage (about $3,800 per worker in tax savings, on average, for family coverage) that ACA marketplace plans don’t match.
• COBRA continuation coverage lets you stay on a former employer’s plan for up to 18 months after leaving, but you pay the full premium (employer + employee share) plus a 2% admin fee — often making it the most expensive option by far.
• Health-care sharing ministries and association health plans exist as alternatives but have meaningful gaps in coverage and consumer protections.
• Spouse’s plan is the most common workaround — one partner takes a job primarily for the family coverage — but this transfers job lock to the spouse.

For a worker considering a move, the practical question is the gap between your current employer-subsidized cost and what you’d pay for comparable coverage on the individual market or a new employer’s plan. KFF’s annual survey and Healthcare.gov’s plan-finder tools let you estimate that gap before committing. For someone weighing self-employment, the quarterly-tax estimation question is the related financial-planning piece — the full cost of self-employment includes both the employer-side payroll taxes and the unsubsidized health-insurance premium, which is why solo founders so often underestimate their true cost of going independent.

The deeper truth: the labor market is less mobile than wage data suggests, because the value of employer-sponsored benefits is real, large, and tied to staying put. For small-business owners who depend on consistent staffing, the same dynamic shows up in reverse — workers whose benefits are not as good as a large employer’s will leave faster, which is why the break-even analysis on hiring should always include the cost of benefits, not just wages.