One of the earliest and most popular provisions of the Affordable Care Act — the one that allows young people to stay on their parents' plans until age 26 — may have a more far-reaching effect than previously measured, according to a new study published in the Journal of Health Economics.
The study determined the provision offers young adults more flexibility making both educational and work choices earlier in their lives. This flexibility leads to better employment matches for new workers entering the labor force. It also leads to higher overall wages, according to the study.
To conduct the study, researchers looked at similar provisions in state-based laws that were in effect before the passage of the Affordable Care Act. Between 1995-2010, at least 35 states began requiring employers to allow their employees' children to stay on their coverage plans until various ages — from 24 to 30.
Based on the provision's effect in those states and the fact more employers will have to provide coverage nationally under the Affordable Care Act, the study estimates the provision will increase wages by an average of 3.5% to 4.6% for people who were 18 or younger when the health-care overhaul passed.
The study identified a few ways Obamacare's dependent provision could influence labor-market decisions by young people.
First, without the provision, people attending college at later ages — at colleges that often require them to have health insurance — will experience lower costs from staying on their parents' plan. It could also lead them to pursue more time in college or graduate school, rather than immediately needing to find a job that offers health insurance.
Having health insurance also reduces the phenomenon known as "job-lock," in which workers feel confined to a job because they cannot take their employer-sponsored health insurance with them. With job-lock lessened, the researchers said, people are free to move around — often ending up with better-matching and higher-paying jobs.
"This would be particularly important early in people’s careers before people gain experience in careers that are not their best matches," the researchers wrote.
Finally, the researchers cited a third possible effect — called the "compensating differential theory" — that suggests since having health insurance through an employer should lower ultimate wages, young workers could enter the labor force through jobs that offer higher wages but do not offer health insurance.
Based on the state lawsstudied in the research, women experience wage gains of about 3.1% while they have access to their parents' health insurance, an increase that largely continues to be evident after they lose access to dependent coverage. Men, meanwhile, experience gains of about 1.6% after they no longer have access to dependent coverage.
The extension of dependent coverage is one of the only universally popular provisions of Obamacare, which as a whole is still widely unpopular. According to a March poll conducted by the Kaiser Family Foundation, 80% of respondents said they had a favorable view of the provision — including 76% of Republicans.
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