Essays on the U.S. Health Insurance Reform

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by Naoki Aizawa, University of Pennsylvania

In 2010, the United States passed the comprehensive health insurance reform legislation, known as the Affordable Care Acts (hereafter, ACA). The major goal of the ACA is to expand coverage through a variety of tools. It creates a regulated health insurance market called insurance exchange, provides subsidies to participants in insurance exchange, expands Medicaid, imposes a health insurance mandate, and others.

The purpose of my dissertation is to predict the impact of the ACA on health insurance coverage, health, and labor market outcomes based on a structural estimation of an equilibrium model of labor and health insurance markets. Below, I explain the first chapter of my dissertation, which is the most relevant to the fellowship priority areas.

In the first chapter, I investigate the effect of ACA on the health insurance coverage, health outcome, health care spending, and employment and how it differs across individuals within a life-cycle framework. I also investigate whether there exists a welfare enhancing alternative system.

I develop an equilibrium life-cycle labor search model, where worker’s health care choice and employer’s health insurance provision are endogenously determined, that can match the most salient features of the labor market and health care in the data. In the model, each individual possesses health capital and its dynamics is affected by health care choice. Each employer makes a decision to offer health insurance
by aggregating preference of employees. The cost of providing health insurance, determined through an insurance market, depends on a health composition of employees of the employer. Endogenous determination of health insurance provision and insurance premium creates interactions between labor and health insurance markets, which are necessary to predict the general equilibrium effect of the ACA.

I estimate the model by using three data sources: 1996 Survey of Income and Program Participation, 1996-1999 Medical Expenditure Panel Survey, and 1997 Robert Wood Johnson Employer Health Insurance Survey. Estimation is by simulated method of moments.

By using the parameter estimates, I conduct counterfactual policy experiments to evaluate the heterogeneous impact of the ACA across individuals, including its effect on older worker’s labor supply and health outcome. Because the ACA creates insurance exchange and thus improves the access of health insurance outside employment, one may expect that it increases early retirement. However, such an effect depends on how the premium in insurance exchange will be in equilibrium and employer’s endogenous response with respect to health insurance provision. The model developed here captures these equilibrium effects and helps us to understand the effect of the ACA to older workers.

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