Obamacare Job Crisis

Written By Brian Hicks

Posted July 17, 2013

As President Obama’s sweeping healthcare reform begins to be implemented on a national level, there appear to be rising concerns about a possible adverse effect on the jobs recovery that’s tentatively underway.

Yahoo! Finance notes that a new report out from the National Bureau of Economic Research indicates that between 530,000 and 940,000 Americans may decide to quit working after January 1, 2014, since they will become eligible for health insurance under the public exchanges mandated by the Affordable Care Act. This study takes as a premise the assumption that there are people who decide to take a job just so they can have health insurance.

We can read this in one of two ways. On the one hand, critics will no doubt read in these findings damning evidence that President Obama’s healthcare reforms encourage an idling workforce while simultaneously expanding the dreaded welfare state. On the other hand, we may also take this as evidence that the Affordable Care Act frees certain people up to pursue more meaningful work instead of being chained to one job simply because it provides them with health insurance (indeed, this is a real economic phenomenon, known as the “employment lock”).

Lest we be skeptical of the study, by the way, it’s a fairly heavyweight project undertaken jointly by researchers at Columbia, Northwestern, and the University of Chicago. Business News Daily quotes:

“When the Affordable Care Act is enacted, it’s possible that hundreds of thousands of people may choose to leave the labor force or retire earlier than they otherwise would have because they now have access to health insurance outside of their jobs,” said Craig Garthwaite of Northwestern University.

Authors Garthwaite, Tal Gross, and Matthew J. Notowigido explored the reforms made to Tennessee’s Medicaid program back in 1994. That expansion had certain prominent parallels to how the Affordable Care Act is going into effect. However, the Tennessee program backfired; some ten years down the line, the state had to kick about 170,000 childless adults out of the program due to untenable increases in costs.

The core finding in the Tennessee affair was that when people lost public insurance, it motivated more people to find jobs. But under the Affordable Care Act, anyone under 65 may get insurance at a public exchange without any minimum income requirement.

Presently, it’s estimated that there may be about 8.9 million Americans who do not qualify for Medicaid because they earn too much, and also get their health insurance via an employer.

According to the study, then, we could see as many as 4.2 million people switching from employment-provided health insurance to a publicly-subsidized plan. But of these switchers, some 530,000-940,000 could simply leave their jobs since their primary purpose in working was to obtain health insurance, which they can now do without the necessity of employment.

Granted, this isn’t exactly ‘killing’ jobs (after all, working is a matter of choice), but it does raise troubling questions of incentive. Besides, some of those who may leave their jobs could be individuals already close to the retirement age, or spouses who took jobs in order to obtain health coverage that their spouse cannot get. Also, unemployment remains high (meaning there are many sectors suffering from an oversupply of workers). That means for every individual leaving, there are likely going to be others in line to take that job.

However, this study also raises a really good prospect: increased mobility in the workforce.

As a result of the Affordable Care Act, we could actually see workers becoming more capable of moving between jobs without giving too much consideration to the individual health benefits they offer—which has traditionally been a major concern for would-be workers.

Economists have shown that the close link between employment and healthcare coverage in the U.S. economy has adversely impacted entrepreneurial risk-taking, movement of workers to better economic conditions, and general mobility. From Business News Daily:


“There is little doubt that the ACA will affect the employment picture,” [Tal] Gross said. “Historically, health insurance in the United States has been tightly linked to employment, and the ACA weakens that link.”

The real question, of course, is whether these new benefits will be balanced by the new costs imposed on others (i.e. penalties for employers who do not comply with the ACA’s mandates). We’ll be analyzing the ramifications of the ACA’s provisions for several years to come, and a final verdict isn’t going to be out anytime soon.

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