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Is the Affordable Care Act Affecting Retirement Yet?

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Abstract

We analyze whether the Affordable Care Act (ACA) has affected labor supply of older Americans using data that span more than four years after the policy’s implementation in 2014. We find no changes in labor supply of older Americans either in response to subsidized marketplace coverage, which became available nationally in 2014, or in response to the expansion of Medicaid eligibility in some states but not others. We analyze multiple dimensions of labor supply — labor force participation; employment; full-time work conditional on employment — as well as several measures of retirement including self-reported retirement and the receipt of retirement income. We fail to find labor supply effects even for subgroups with less than a high school education or those with fair or poor health, who might have been expected to have a greater labor supply response. The lack of a labor supply response stands in contrast to the large gains in coverage observed in 2014. These results suggest that for Americans approaching retirement the Affordable Care Act achieved its primary goal of increasing coverage without the unintended consequence of reducing labor supply.

Key Findings

  • Previous studies of suggest that having an alternative to employer-based health insurance makes older workers more likely to retire. Therefore, many analysts expected that the implementation of the coverage provisions of the Affordable Care Act (ACA) in 2014 would reduce labor supply of older workers.
  • We find that insurance coverage of Americans ages 50 through 64 increased significantly after the ACA, with the uninsured rate dropping from 16 percent in 2013 to 12 percent in 2014 and 10 percent in 2015 and 2016.
  • We find no changes in labor supply of older Americans either in response to subsidized marketplace coverage, which became available nationally in 2014, or in response to the expansion of Medicaid eligibility in some states but not others. We fail to find labor supply effects even for subgroups with less than a high school education or those with fair or poor health, who might have been expected to have a greater labor supply response.
  • These results suggest that for Americans approaching retirement the Affordable Care Act achieved its primary goal of increasing coverage without the unintended consequence of reducing labor supply.

Citation

Levy, Helen, Thomas Buchmueller, and Sayeh Nikpay. 2018. “Is the Affordable Care Act Affecting Retirement Yet?” University of Michigan Retirement Research Center (MRRC) Working Paper, WP 2018-393. Ann Arbor, MI. https://mrdrc.isr.umich.edu/publications/papers/pdf/wp393.pdf

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Project

Paper ID

WP 2018-393

Publication Type

Working Paper

Publication Year

2018