Working Paper: NBER ID: w20222
Authors: Jeremy D. Goldhaber-Fiebert; David M. Studdert; Monica S. Farid; Jay Bhattacharya
Abstract: Reforms introduced by the Affordable Care and Patient Protection Act (ACA) build new sources of coverage around employment-based health insurance. But what if firms find it cheaper to have their employees obtain insurance from these sources, even after accounting for penalties (for non-provision of insurance) and employee bonuses (to ensure the shift is cost neutral for them)? State and local governments (SLGs) have strong incentives to consider the economics of such “divestment”; many have large unfunded benefits liabilities. We investigated whether SLGs would save under two scenarios: (1) shifting all employees and under-65-retirees to alternative sources of coverage; (2) shifting only employees whose household incomes indicate they would be eligible for federally subsidized coverage and all under-65-retirees. Full divestment would cost SLGs more than they currently pay, due primarily to penalty costs. Selective divestment could save SLGs nearly $129 billion over 10 years at the expense of the federal government.
Keywords: No keywords provided
JEL Codes: H51; H7; I1; J45
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| SLGs divesting from employment-based health insurance (G52) | increased federal costs (H59) |
| Selective divestment of SLGs (G39) | savings of nearly $129 billion over a decade (H60) |
| Penalties under the ACA (H26) | deterrent against complete divestment (G34) |
| Shifting employees to federally subsidized coverage (J32) | significant savings for SLGs (H70) |
| SLGs' decisions (D79) | influenced by financial and non-financial incentives (M52) |
| Number of employees eligible for Medicaid or subsidies (I18) | overall savings from selective divestment (G35) |
| Structure of penalties under the ACA (H26) | savings from selective divestment (G35) |
| Legal landscape surrounding divestment strategies (G38) | affects SLGs' decisions (D79) |