How do Health Insurance Premiums Affect Employment and DI Use Among Adults with Disabilities?

by Jonathan Holmes, University of California, Berkeley

For U.S. firms that offer health insurance, the cost of hiring a person with a disability can be extremely high. Most U.S. firms purchase risk-rated insurance, meaning it costs more to insure an employee with a pre-existing condition relative to a healthy employee. This paper asks: To what extent do firms discriminate based on these health insurance costs? To answer this question, we make use of a unique policy change enacted as a part of the Affordable Care Act (ACA), which gave small firms the opportunity to purchase community-rated coverage. Under community-rating, small firms no longer pay more to hire employees with expensive health conditions. Using a unique administrative dataset from Utah, we test whether small firms offering insurance are more likely to hire and retain employees with an expensive disability following the Affordable Care Act.

This project has direct relevance to 3 RDRC focal areas for fiscal year 2020. We are the first to use administrative data linking employment status to hospital records and health insurance claims, allowing us to directly measure the prevalence of health conditions and disability status. We will use this data to document trends in where disabled workers are working and where they are receiving health insurance (including whether they are receiving SSDI) both before and after the passage of the Affordable Care Act. Second, our causal estimates on employer discrimination cast light on induced entry, because existing work shows that workers who have few job prospects often apply for disability insurance (Autor & Duggan, 2003). Finally, this project will help improve long-term projections of labor force participation under both current and proposed policies. If a version of Medicare for All is passed by Congress under a future administration, this study would inform how this policy is likely to affect employment of disabled workers.

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