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The Importance of the Meaning and Measurement of "Affordable" in the Affordable Care Act

Author

Listed:
  • Richard V. Burkhauser
  • Sean Lyons
  • Kosali I. Simon

Abstract

This paper focuses on the practical importance of a critical but under-explored interpretation of a provision in the Affordable Care Act (ACA): whether "affordable" refers to the cost of single coverage alone, or to family or single coverage as applicable to the worker, in determining the employer's mandated coverage requirement and workers' (and their dependents') access to subsidized exchange coverage. Since the average annual total premium for family coverage is substantially higher than that for single coverage (on average $12,298 vs. $4,386 in 2008) this is a non-trivial distinction. Using data on workers from the Current Population Survey merged with estimates of employer and exchange policy premiums, we investigate the impact of the affordability decision on the fraction of workers who could then access exchange coverage subsidies and on the correspondingly lower employer sponsored insurance (ESI) coverage rates. We do via a series of calculations for each worker that first shows the financial incentives at stake in deciding between ESI and subsidized exchange coverage. We then show how many of those who stand to gain from exchange coverage could do so under the two different affordability rules and different levels of employee contributions. Finally, we show the extent to which a single affordability rule would cause low-income workers with families to fall into a "no-man's land" with no source of affordable family coverage. We estimate that choosing a family affordability rule could initially lead to as many as 1.3 million more workers accessing exchange subsidies for themselves and their families than under a single affordability rule. If employees pay 50 percent of the premiums in the future, this number increases to 6 million. Increased use of exchange subsidies would be accompanied by reductions in ESI coverage and increased costs to taxpayers. Alternatively, choosing a single affordability rule would initially result in close to 4 million dependents of workers with affordable single coverage not having affordable health insurance. This would grow to close to 13 million if employees pay 50 percent of the premium.

Suggested Citation

  • Richard V. Burkhauser & Sean Lyons & Kosali I. Simon, 2011. "The Importance of the Meaning and Measurement of "Affordable" in the Affordable Care Act," NBER Working Papers 17279, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:17279 Note: HC HE
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    References listed on IDEAS

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    1. Jonathan Gruber, 2011. "The Impacts of the Affordable Care Act: How Reasonable Are the Projections?," NBER Working Papers 17168, National Bureau of Economic Research, Inc.
    2. Gruber, Jonathan, 2011. "The Impacts of the Affordable Care Act: How Reasonable Are the Projections?," National Tax Journal, National Tax Association, vol. 64(3), pages 893-908, September.
    3. Richard V. Burkhauser & Kosali I. Simon, 2008. "Who Gets What From Employer Pay or Play Mandates?," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 11(1), pages 75-102, March.
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    Cited by:

    1. Casey B. Mulligan, 2014. "The Economics of Work Schedules under the New Hours and Employment Taxes," NBER Working Papers 19936, National Bureau of Economic Research, Inc.
    2. Casey B. Mulligan, 2012. "The ARRA: Some Unpleasant Welfare Arithmetic," NBER Working Papers 18591, National Bureau of Economic Research, Inc.
    3. Casey B. Mulligan, 2015. "The New Full-Time Employment Taxes," Tax Policy and the Economy, University of Chicago Press, vol. 29(1), pages 89-132.
    4. Kolstad, Jonathan T. & Kowalski, Amanda E., 2016. "Mandate-based health reform and the labor market: Evidence from the Massachusetts reform," Journal of Health Economics, Elsevier, vol. 47(C), pages 81-106.
    5. Casey B. Mulligan & Trevor S. Gallen, 2013. "Wedges, Wages, and Productivity under the Affordable Care Act," NBER Working Papers 19771, National Bureau of Economic Research, Inc.
    6. Trevor S. Gallen & Casey B. Mulligan, 2013. "Wedges, Labor Market Behavior, and Health Insurance Coverage under the Affordable Care Act," NBER Working Papers 19770, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • I0 - Health, Education, and Welfare - - General

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