Association for Public Policy Analysis & Management

Panel: Who Bears the Burden of Healthcare Costs?

(Health Policy)

The Affordable Care Act imposes mandates on employers with 50 or more fulltime employees to offer health insurance to them. These mandates have the potential to increase the cost of providing health insurance to workers. Research on who bears the burden of health care cost is not at a consensus. This session presents three papers that examine the burden of health care cost. The first paper evaluates whether workers covered by employer-sponsored insurance (ESI) bear the healthcare costs associated with doctor diagnosed health problems in the form of lower wages. Using a difference-in-difference approach with data from Health and Retirement Survey (HRS), the authors find that among workers with ESI those with a history diabetes, lung disease, stroke, and arthritis receive significantly lower wages than healthy workers. This wage penalty is absent for workers who suffer the same health conditions but are not covered by ESI. The authors do not find significant wage offsets for workers with chronic hypertension, cancer, or other heart problems. The second paper examines the incidence of increased health care cost associated with health insurance mandates. The authors draw on data from the National Longitudinal Survey of Youth 1979 and information on high cost mandates. The authors find no evidence that high cost mandates discourages employers from offering ESI. They do, however, find evidence that employers adjust wages and hours to offset some of the cost associated with mandates. Overall, wages and hours decline by about 4 percent and 1 percent respectively in response to high cost mandates, and these effects dissipate with time spent in the labor market. In addition, women bear almost all of the incidence of mandate cost. The wage and hours effects are concentrated among workers who began their careers in small firms and non-unionized jobs. The third paper studies regulation spillover from the private health insurance market to the public health insurance market. Using data from the Current Population Survey, the authors study the impact of mental health parity laws on the choice of health insurance among veterans. To the extent that mandating benefits through mental health parity laws could increase health care cost, the increased cost can be passed on to workers in the form of increased premiums and lower wages. The authors find that mental health parity laws reduce ESI coverage among veterans by 2.1 percentage points. The drop in ESI coverage reflects a combination of veterans opting out of both employment and ESI. This reduction in ESI coverage was largely offset by increases in coverage under public health insurance programs such as Veterans Affairs coverage, Medicaid and Medicare. The papers in this session highlight the fact that workers pay for the increased health care cost associated with mandated benefits in the form of reduced wages. These cost are, however, not distributed evenly across workers, worker with chronic diseases and women are more likely to have reduced wages due to mandates. These findings imply that policymakers need to consider these downstream effects when proposing regulations on health insurance markets.