How the ACA will Create More Job Freedom
By Philip SusserPublished October 21, 2014By Phil Susser, 10/21/2014
Before the ratification of the Patient Protection and Affordable Care Act (ACA), the majority of individuals receiving private insurance were doing so through employer provided insurance. Approximately 90% of those with private insurance received their coverage through their employer. Because their health insurance status was so tightly intertwined with their job status, leaving their jobs often times meant losing health insurance. This reluctance to leave one's job out of fear of losing health insurance is known as "job lock" and is estimated to have reduced job mobility by 25%. Because individuals are often times more inclined to move jobs because of productivity reasons — they may feel that they will become a more productive worker in a different job — this "job lock" phenomenon has potentially affected the innovation and productivity of American workers. But with the rise of health insurance markets, an alternative approach to traditional employer-provided health insurance, job lock is beginning to be a distant concern for American employees.
Prior to the advent of the ACA healthcare exchanges, individuals who wanted to purchase health insurance privately — that is, separate from their employer — would have their pre-existing conditions scrutinized, often times barring them from affording any insurance policy. Now that insurance providers are no longer able to exclude coverage because of pre-existing conditions, sick individuals have more freedom to shop around for insurance, independent from their employer. The potential downside to this new work incentive structure is that those who used to work part-time purely for benefits, are now leaving the workforce altogether. In February 2014, the Congressional Budget Office estimated that approximately 2 million people will leave the job market by 2017 as a result of this new freedom. At first glance, this may seem to be a troubling statistic. Paul Ryan, Chairman of the House Budget Committee, further criticized the decrease in labor supply and the subsidy structure of the Affordable Care Act — ostensibly creating an incentive for low-income individuals to limit the amount they work in order to continue to receive subsidies for their insurance.
While the subsidies may discourage some low-income workers from staying in the labor market, the increased job mobility that comes with health exchanges is a worthy trade-off. Individuals who were holding off retirement because of their insurance coverage may now decide to retire, opening up job opportunities for younger workers. Additionally, mothers who may return to the labor market only for insurance purposes now have the ability to hold off applying for jobs until they feel fit to do so. The New York Times reported that the decrease in job lock could result in increased entrepreneurship. Along those same lines, the Urban Studies Institute estimated that approximately 1.5 million workers will choose to become self employed as a result of the Affordable Care Act. There seems to be an almost clear consensus that decoupling health insurance with employment status facilitates a more productive and efficient labor market. While some estimates may seem troubling in their projections of reduced labor supply, there are net gains from this new form of health insurance provision.