Working Paper: NBER ID: w18698
Authors: Naoki Aizawa; Hanming Fang
Abstract: We present and empirically implement an equilibrium labor market search model where risk averse workers facing medical expenditure shocks are matched with firms making health insurance coverage decisions. Our model delivers a rich set of predictions that can account for a wide variety of phenomenon observed in the data including the correlations among firm sizes, wages, health insurance offering rates, turnover rates and workers' health compositions. We estimate our model by Generalized Method of Moments using a combination of micro data sources including Survey of Income and Program Participation (SIPP), Medical Expenditure Panel Survey (MEPS) and Robert Wood Johnson Foundation Employer Health Insurance Survey. We use our estimated model to evaluate the equilibrium impact of the 2010 Affordable Care Act (ACA) and find that it would reduce the uninsured rate among the workers in our estimation sample from 20.12% to 7.27%. We also examine a variety of alternative policies to understand the roles of different components of the ACA in contributing to these equilibrium changes. Interestingly, we find that the uninsured rate will be even lower (at 6.44%) if the employer mandate in the ACA is eliminated.
Keywords: health insurance; labor market; Affordable Care Act; equilibrium model
JEL Codes: G22; I11; I13; J32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Affordable Care Act (ACA) (G52) | uninsured rate (I13) |
| elimination of employer mandate in ACA (G52) | uninsured rate (I13) |
| Affordable Care Act (ACA) (G52) | health insurance offering rate for firms with 50 or more workers (G52) |
| Affordable Care Act (ACA) (G52) | health expenditures (H51) |
| Affordable Care Act (ACA) (G52) | fraction of healthy workers in the population (J28) |
| removal of individual mandate component (G52) | uninsured rate (I13) |
| removal of premium subsidies (H23) | adverse selection problems (D82) |
| Affordable Care Act (ACA) (G52) | health insurance coverage (I13) |
| Affordable Care Act (ACA) (G52) | labor market outcomes (J48) |
| health insurance (I13) | wages (J31) |
| health insurance (I13) | firm size (L25) |