Causes
The two main ways in which health insurance can create job lock are the open enrollment waiting period and pre-existing limitations. The first obstacle is that most new employees at a new job have to wait a certain amount of months in order to be eligible for certain fringe benefits, including health insurance. The second obstacle is that many health insurance companies try to discourage the high risk consumers or sick consumers from enrolling in their health insurance plan since they are the most costly for the health insurance companies. One way to do this is through the pre-existing limitations in which those who have certain medical conditions (ex. heart attacks, diabetes, over weight, cancer, AIDS/HIV) will be denied for a health insurance plan. These two barriers prevent employees from wanting to switch jobs for the fear of losing their health insurance benefits. In summary, the long waiting periods, risk of having pre-existing conditions, and the potential for less extensive health coverage at the new job all increase the financial risk associated with moving jobs, making change in jobs a very costly endeavor, so workers are more likely to stay locked into their current jobs instead of risking the job transfer. If employees knew that all their illnesses would receive identical coverage regardless of whether they worked, where they worked, or how long they had been on the job, health insurance would not be a deterrent to worker mobility. On a macro-scale, job lock is harmful to the overall economy.
While health insurance may be purchased on an individual basis, in states that permit medical underwriting individuals with health conditions may be declined coverage or, if coverage is offered, face high premiums or benefit exclusions.
An example of a job lock due to a defined benefit pension plan would be someone who has been working for a company for 20 years, thus accruing a higher retirement income benefit. If they leave to work for another company their benefits are reset and they eventually realize a lower level of retirement benefits. For more on the specifics of defined benefits plans, see http://retireplan.about.com/cs/retirement/a/aa_defined_a5.htm
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