Affordable Care Act Led to Parents Staying in Jobs Longer, Study Finds

Health insurance coverage–and the options an employer offers or doesn’t offer–has long represented an important factor in many Americans’ decisions about where and how they choose to work.

A study by the University of Chicago’s Maggie Shi aims to shed new light on this dynamic, specifically the effects of an important element of the 2010 Affordable Care Act (ACA).

Prior to enactment of the ACA, health insurance coverage for dependents typically ended at age 19 based upon provisions of an employer’s individual plan and state laws. Statutes spurred by the ACA, however, require private health insurers to extend coverage to adult children up to the age of 26.

In their paper, Shi and her co-authors Hannah Bae and Katherine Meckel examined what these changes resulting from the ACA have meant for the labor market. They found that improved employer-sponsored health insurance for dependents–individuals such as spouses and children who are covered under a policyholder’s insurance plans–encourages individuals to remain in their jobs for longer periods, a concept called “job lock.”

“While the ACA’s extended dependent coverage was intended to increase insurance coverage for young adults, we sought to understand whether it has led to the indirect effect of encouraging parents to remain in their jobs for longer than they otherwise might have,” explained Shi, an assistant professor at the Harris School of Public Policy. “Our study revealed that extending the age by which dependents can be covered does indeed incentivize their parents to stay in their jobs.”

The study relied upon the Truven Health MarketScan CCE Database ("MarketScan Data"), a comprehensive panel of employer-sponsored health insurance claims from 2000 to 2012, providing the scholars with data in the years leading up to the ACA’s reform and the years immediately following.

The study uses the fact that some employers offered coverage until the end of the year a dependent turns 26. This means that if a dependent is born in January, they may qualify for almost a year’s worth of additional coverage compared to their peer born one month earlier in December.

Comparing across dependents born around January and December, Shi, Bae, and Meckel found significant increases in dependent enrollment and coverage days for those more affected by the ACA dependent mandate, indicating that the legislation has been effective in extending coverage. The researchers also discovered slight increases in job retention rates among parents with dependents born in January, suggesting job lock effects. Their results indicate that one additional year of eligibility leads 1.8 percent of parents to remain at a job they would have otherwise left. Their research accounted for other factors that could influence job lock, such as differences in dependents’ health, individual coverage, and employer compensation changes.

The study’s methodology enabled the researchers to observe both parental and dependent outcomes. This allowed them to calculate the ratio of job retention with respect to dependent coverage–essentially, figuring out the relationship between this type of coverage and “job lock.”

Additional findings include:

1. Older parents nearing retirement age (55+) show higher job retention ratios (0.30) compared to younger parents (0.13), indicating they are more susceptible to job lock effects.
2. Parents who are not already covering their spouse or other dependents are more likely to be induced by the dependent mandate to stay at their job.
3. Parents of dependents who had inpatient care are also more likely to stay in their jobs, showing that health issues increase the value they place on coverage.

The paper highlights the crucial role of employer-sponsored health insurance in shaping labor supply dynamics. As the researchers explain, “policies aimed at expanding dependent health insurance coverage, say through public insurance expansions or private insurance mandates, may have important within-family spillover effects on labor supply.”