The Effect of the Health Insurance Mandate on Labor Market Activity and Time Allocation: Evidence from the Federal Dependent Coverage Provision

Abstract

The primary goal of the federal dependent coverage mandate was to increase health insurance coverage among young adults, the group with the lowest prevalence of health insurance coverage. To understand the full impacts of the federal dependent coverage mandate, it is important to evaluate how the mandate affects labor market activities and time spent away from work among young adults. Using data from the Consumer Population Survey (CPS) and the American Time Use Survey (ATUS) and implementing a difference-in-differences framework, we find: (1) Young adults substitute employer sponsored insurance for dependent coverage, (2) Affected individuals reduce their work time and switch from full- to part-time employment, and (3) The additional time from reduced labor market activity is reallocated towards more time spent on leisure activities, mainly watching television. The effects of the mandate on labor market activities are stronger in later years. Furthermore, we show that young adults do not increase the time they spend on activities that could enhance their human capital such as education and health, which reemphasizes potential unintended consequences of the mandate. These findings suggest that future work is necessary to fully understand the overall welfare effects of the policy.

The Affordable Care Act and College Enrollment Decisions

“…Whether young adults have health insurance often depends on their parents' income, employment and insurance status, and—prior to the ACA—on their own college enrollment status (e.g., Collins et al ; Kriss et al ; Kronstadt, Mojerie, and Schwartz ; GAO ; Quinn, Schoen, and Buatti ). More recent studies by Antwi, Moriya, and Simon (), Depew and Bailey (), Heim, Lurie, and Simon (), Bailey and Chorniy (), Lenhart and Shrestha (), and Colman and Dave () investigate the effects of health insurance reforms, specifically the federal dependent coverage mandate, on labor supply. Different from these studies we focus on the college enrollment decision of the young working‐age population.…”

“…Fourth, we contribute to the empirical literature that estimates the effects of different components of the ACA on outcomes such as insurance coverage, premiums, and labor market decisions (e.g., Antwi, Moriya, and Simon ; Colman and Dave ; Courtemanche et al ; Depew and Bailey ; Lenhart and Shrestha ) . None of these papers addresses the enrollment issue that is at the center of our analysis.…”

“…This identification strategy is different from the one which is often used to identify the effect of the federal dependent coverage mandate on insurance coverage and labor market outcomes (see Antwi, Moriya, and Simon ; Bailey and Chorniy ; Colman and Dave ; Heim, Lurie, and Simon ; Lenhart and Shrestha ). These studies formulate a DD model where 19–25‐year‐olds are the treatment group and 27–29‐year‐olds form a control group .…”

“…This particular channel could reduce the full-time college enrollment rate. 8 Furthermore, several recent studies by Antwi, Moriya, and Simon (2013), Depew and Bailey (2015), Lenhart and Shrestha (2017), and Colman and Dave (2018) provide evidence that the expansion of the dependent coverage mandate increases the labor market flexibility of young adults and reduces their hours worked.…”

“…For example, Cantor et al (), Antwi, Moriya, and Simon (), Heim, Lurie, and Simon (), Bailey and Chorniy (), Lenhart and Shrestha (), and Colman and Dave ().…”