The Economic Effects of the PPACA

by Dave Schuler on December 18, 2013

When I was out and about today I heard an interesting radio interview with a cat from Northwestern’s business school on the subject of the economic effects of the PPACA. His general thrust was something with which I agree: there are too many moving parts to have much confidence in pronouncements one way or another. There are some good aspects, e.g. portability will make it easier for sole proprietor entrepeneurs to start new businesses. But there are bad aspects as well, e.g. people who buy healthcare insurance don’t spend that money on other things.

He did say a couple of interesting things. The first was something that had occurred to me: the PPACA may well be the beginning of employers getting out of the healthcare insurance business. But one of the things had never occurred to me. His research has suggested that in some states a substantial number of people are working solely to get employer-provided healthcare insurance and that they are likely to stop working when either the employer no longer offers insurance or employment isn’t necessary to be insured. That may further depress the labor force participation ratio.

It also might be bad news for the states. Small as those incomes may be they’re still subject to state income taxes. It might even be the case that the PPACA will cause state revenues to fall while inducing state expenses to rise.

I’d be interested in further observations on the economic effects of the PPACA. Like much else about the law we’ll have a better idea in the fullness of time.

{ 5 comments… read them below or add one }

PD Shaw December 18, 2013 at 4:18 pm

I think the PPACA has unintentionally left a hole for big business that could make lower or middle income workers unable to access the subsidies to buy insurance on the exchange. I say “unintentionally” because I think the drafters assumed that existing big business insurance coverage was generally good and would continue. The problem lies with big businesses with lower wage employees for whom health insurance was not provided or was unaffordable. Since Big Business receives a tax for not providing “minimal essential coverage,” businesses with lower labor productivity are encouraged to provide “bare bones” or “skinny coverage” that may provide little more than free contraceptives, a $100 a day stipend towards a hospital visit, and coverage exclusions for surgeries, prenatal care or X-Rays. If a Big Business provides such coverage than the employees are not eligible for subsidies if they purchase insurance through the exchanges.

The secondary effect is that employees with high medical needs might still enroll in the exchanges even without the subsidies because the need is there. Thus it tilts the population on the exchanges further in the direction of high risks.

Red Barchetta December 18, 2013 at 4:44 pm

“His research has suggested that in some states a substantial number of people are working solely to get employer-provided healthcare insurance and that they are likely to stop working when either the employer no longer offers insurance or employment isn’t necessary to be insured.”

Really? You didn’t know this? Starbucks employees talk about it all the time, and some second (marital) income providers do it for just such a reason.

Dave Schuler December 18, 2013 at 5:38 pm

I know that people do this. What hadn’t occurred to me that enough people did this to affect LFPR.

steve December 18, 2013 at 5:38 pm

At least two of my guys are still working just to get medical insurance. Prior to the ACA, one of them would not have been able to buy insurance on the open market due to a pre-existing condition. Many couples we know base employment decisions about where each of them work upon the health care insurance provided at their respective jobs.

Steve

TimH December 19, 2013 at 10:20 am

But here’s a question: If you just work a job to get health insurance, that means that health insurance is obviously a high priority for you, worth something in excess of what it would cost you to buy it on the market.

Under the PPACA, these people might not have to work at Starbucks to get healthcare, since they could have to go to the market. But they presumably would still want to have health insurance (since they went through the trouble of getting HIRED for it in the first place), and so would need money from somewhere to buy it. Now, if those Starbucks employees no longer worked slinging coffee but instead, something closer to where their passion lies, wouldn’t the general welfare be improved? And some of those baristas are aspiring artists or entrepreneurs – if they spend more time working on that, instead of making lattes, won’t we all be better off (if some of those entrepreneurs start businesses that create products/services we’d want to buy?)

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