Employer-sponsored health insurance is the main source of coverage for U.S. workers, but why firms provide it remains debated. We distinguish two motives: health benefits may help firms retain workers by reducing turnover, or they may improve productivity by investing in worker health. To separate these views, we exploit state-level changes in non-compete agreement (NCA) enforceability. Stronger NCA enforceability reduces employer health plan premiums and shifts coverage toward high-deductible health plans. This shift increases HDHP enrollment and changes health care utilization among affected employees: preventive and routine outpatient visits decline, while high-cost outpatient visits, emergency department visits, and inpatient admissions increase. The evidence supports the retention-cost view and shows that labor-mobility restrictions affect nonwage compensation and employee health risk.