This dissertation examines potential labor market problems arising from the link between employment and health insurance. I study three main issues. First, the non-portability of employer provided health insurance implies that if wages do not offset differences in the valuation of health insurance across jobs, individuals may not move to jobs with higher match specific productivity. I estimate this phenomenon, called "job lock," using the National Medical Expenditure Survey (NMES), 1987. Second, small firms that offer health insurance may attempt to avoid expensive premium variability by maintaining a work force with low expected health costs. Using the NMES, I find small firms that offer health insurance are less like to hire and more likely to layoff workers with families that have medical conditions that lead to higher health insurance premiums. These results suggest that the link between small firm health insurance and employment leads to employment distortions. Third, states have implemented small group health insurance reforms such as portability reforms and premium rating reforms that limit or ban the use of health status in setting premiums. Using March Current Population Survey data from 1991 to 1996, I find that rating reforms increase job mobility and small firm employment opportunities for the sick.