Working Paper: NBER ID: w31220
Authors: Sherry A. Glied; Hansoo Ko
Abstract: Economic theory and empirical studies conclude that the cost of voluntary employer-sponsored health insurance falls on employees. However, the distribution of incidence and the mechanism through which incidence occurs have not been well-established. We provide new evidence about incidence by examining the dependent coverage mandate in the ACA, which requires group insurance to allow adult children to age 26 to remain on their parents’ policies. We establish that the incidence of the mandate fell on covered employees as a group. We then consider three situations in which the benefits of this new coverage to an employee differ from the costs to an employer. First, we compare incidence where the young adult dependent is the youngest child in the family to the situation where the child is not the youngest (so the family could add a dependent to existing family coverage). We find that incidence falls mainly on households where the newly-eligible child is the youngest in the household. Second, higher-income households face a lower tax price of coverage than do lower-income households. We find that the incidence of the mandate falls mainly on the highest income households. Finally, we find that the mandate leads to increased commuting time for parents of newly-eligible dependents.
Keywords: employer-sponsored insurance; compensating differentials; dependent coverage mandate
JEL Codes: H29; I13; J33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| ACA's dependent coverage mandate (G52) | costs borne by employees (J32) |
| youngest child becomes eligible (J13) | wage reduction for families (J31) |
| not youngest child (J13) | wage reduction for families (J31) |
| switch from single to family coverage (J12) | increased out-of-pocket costs for employees (J32) |
| income tax brackets (H26) | burden of insurance costs (G52) |
| increased value of ESI coverage (G52) | job choice dynamics (J29) |
| job choice dynamics (J29) | additional commuting costs (R41) |
| household income (D19) | confounding factor in insurance costs (G52) |