Association for Public Policy Analysis & Management

The first provision of the Affordable Care Act (ACA) requires insurers to allow dependents to remain on parents’ health insurance policies until turning 26 years old starting from September 2010. The ACA dependent insurance mandate provides young adults an alternative source of health insurance coverage other than EPHI that significantly lowers the risk of losing health insurance coverage. Thus, it could exert impact on labor market behaviors of young adults, which has drawn much attention in recent studies. In fact, the mandate essentially increases values of ESHI for parents with young adults by allowing more family members under coverage of family plans but adding no extra cost. The fundamental link between health insurance and workplace in the U.S. implies that the mandate could greatly affect labor market behaviors of parents according to the compensating theory. In this study, we specifically focus on job turnover decisions of parents with targeted adult children, which is overlooked in the empirical literature.

This study adds evidence to the existing broad literature on the relationship between health insurance and labor market behaviors, and contributes to the labor economics literature in evaluating how labor market behaviors react to a fringe benefit measure. It also highlights one of several negative consequences that accompany such laws if alleviate job-lock is among one of the several important goals of the ACA.

Methods and Results

To identify the effect on job mobility decisions of parents, we exploit the clear age cutoff at 26 and compare turnover possibilities between working parents in two groups: parents with any children who are eligible for coverage of parents’ EPHI——children between 19 to 25 years old and parents without eligible children——either the oldest child is too young or the youngest child is too old to be affected. To make the two groups as comparable as possible, we restrict the latter group to parents with oldest child between 16-18 years old and parents with youngest child between 26-29 years old. We also allow labor market conditions differ among various age groups by controlling for a set of age-time dummies. Using data of the Survey of Income and Program Participation (SIPP) 2008 panel, our estimates suggest that the ACA dependent mandate is likely to deter job mobility of parents by 1.3 percentage points over a four-month period, despite its recognized success in insuring young adults. Working parents are also found to reduce job mobility before the implementation and as early as the enactment in anticipation of imminent coverage for adult children.