The Impact of Massachusetts Health Insurance Reform on Labor Mobility

Abstract

This paper examines the impact of the Massachusetts Health Insurance reform of 2006 on job mobility and employment exit using administrative data from the Social Security Administration.  The Massachusetts reform mandated that every resident have insurance coverage and facilitated this initiative by requiring employers to offer coverage, as well as expanding Medicaid and creating health insurance exchanges with subsidized premiums.  These elements provided the basis for the Patient Protection and Affordable Care Act (ACA) passed nationwide in 2010, so the experience of workers in Massachusetts provides evidence for how the ACA may affect labor market efficiency.  Of particular interest is the extent to which Massachusetts’ reform reduced “job lock” – the phenomenon in which workers stay with employers to maintain their health insurance coverage, rather than move to a more productive match at another employer (especially a small firm unlikely to offer coverage) or exit employment entirely.  The project measures differential effects by age, gender, and firm size, and tries to disentangle the effects of the employer mandate and the individual mandate by identifying individuals who cross state lines between home and work.

This paper found that:

• Trend analysis and regression estimates indicate that Massachusetts residents were actually less likely to move to new employers after the reform, relative to workers in neighboring states that did not make structural changes to their health insurance markets.
• Estimates of whether Massachusetts workers moved from large firms, which likely offered insurance, to small firms is statistically insignificant.
• Employment transitions were largely unaffected by the Massachusetts reform, though some select groups saw increases in employment exits that may be consistent with the easing of job lock.

 
The policy implications of this paper are:

• On the whole, the evidence that the Massachusetts reform increased mobility across employers or out of employment is weak.
• These findings suggest that either job lock does not tie workers to their jobs as much as labor economic theory had suggested, or that the Massachusetts reform, and by extension the ACA, may not ease job lock as much as some previous research had suggested.