Reports & Data
SOURCE: National Bureau of Economic Research

The Affordable Care Act (ACA), passed in 2010, represents the largest reform to the U.S. health care system since the introduction of Medicare and Medicaid in 1965. One of its primary goals was to reduce the number of uninsured, which had hovered around one-sixth of the non-elderly population during the prior decade. Several provisions of the law aimed to achieve this goal, including expansions of the Medicaid program to cover low-income individuals, private health insurance subsidies provided to individuals with family incomes between 100 and 400% of the federal poverty line (FPL), mandates on employers to offer health insurance coverage to employees, and penalties imposed on individuals without insurance. After many of these provisions were implemented in January of 2014, uninsurance rates among non-elderly adults fell substantially, from 20.1 percent in the fourth quarter of 2013 to 15.1 percent by the fourth quarter of 2014 and 12.6 percent by the fourth quarter of 2015, as shown in Figure 1. 1 However, these aggregate patterns do not indicate how insurance coverage would have evolved in the absence of the ACA.

Many of these same provisions also serve to weaken the tie between employment and health insurance coverage, and therefore may affect both labor supply and demand. Consistent with this, the Congressional Budget Office (CBO) has estimated that the ACA will reduce the size of the labor force by 1.5 to 2 percent (2 to 2.5 million individuals) by 2024 (CBO 2014). While the primary channels for this projected effect are through the incentive effects resulting from the availability of subsidies for private health insurance coverage and the expanded coverage for the Medicaid program that could reduce labor supply, there is also scope for effects on employment through policies that could impact labor demand. Aggregate labor force participation rates do not show any significant changes after the legislation was passed in 2010 or after key provisions were implemented in early 2014 (see Figure 2). But again, these aggregate rates do not indicate how labor force participation would have changed if the ACA had not been implemented.

In this paper, we examine how the ACA affected health insurance coverage and labor market outcomes in the two years after the key provisions of the ACA took effect on January 1, 2014. Because the ACA is a national reform and affected all states, it is difficult to disentangle the effects of the law from other changes that would have happened without it.