Academic journal article American Journal of Law & Medicine

Obamacare's Impact on Labor Markets: Limits on the Predictive Value of Romneycare

Academic journal article American Journal of Law & Medicine

Obamacare's Impact on Labor Markets: Limits on the Predictive Value of Romneycare

Article excerpt

I. INTRODUCTION

There has been great debate about the potential labor market impact of the Affordable Care Act ("ACA" or "Obamacare"). Some have pointed to Massachusetts as the harbinger of what is to come nationally,* 1 while others have predicted massive dumping of employer-based insurance.2 An extension of this labor market debate was on full display during the summer of 2012.3 Critics seized on a McKinsey & Co. survey that found that Obamacare could result in thirty percent of companies dropping employer-sponsored insurance (ESI).4 Meanwhile, proponents of the ACA quickly and continually referred to the experience of companies in Massachusetts as a way to push back on this narrative.5

Surprisingly, there is bipartisan agreement that Massachusetts's own health reform efforts ("Romneycare") does in fact serve as an accurate model for what to expect under the federal law: this has complicated a lucid discussion of the ACA's potential labor market impact.6 The parties just happen to draw opposite conclusions. For Republicans, the state with the nation's highest premiums embodies many of the worst elements of what happens when government gets even more involved in healthcare.7 For Democrats, the state experiment that expanded coverage is worthy of national emulation.8

This Article argues that Massachusetts holds very limited lessons for the expected labor market impacts under the ACA. Unfortunately, both parties have arrived at an incorrect assessment of the lessons to be learned from Massachusetts because of politics, oversimplified talking points, the lack of a nuanced understanding of the two laws, and a failure to comprehend the Commonwealth's unique characteristics that have shaped employer and employee behavior.

II. WHY DOES IT MATTER?

ACA advocates, such as Jonathan Gmber of the Massachusetts Institute of Technology (MIT) who sits on the governing board of Massachusetts's state-based exchange (the "Connector") and served as a paid contractor for both former Governor Romney and a paid advisor to the United States Department of Health and Human Services (HHS) during Obama's presidency, have pushed an "expect the same" narrative, implying that the impact of the two laws will be essentially the same.9 For example, Gmber has stated that "our understanding of the impacts of the ACA can be [] informed by the experience of Massachusetts."10

Both the White House and HHS have repeatedly released statements to the media pointing to Massachusetts as an example of what is ahead nationally.* 11 In one such statement, HHS argued that "[t]he experience in Massachusetts, along with projections from the Congressional Budget Office [CBO], suggest that the health care law will improve the affordability and accessibility of health care without significantly affecting the labor market."12

This sentiment made its way into early official projections by the non-partisan CBO. The CBO stated that "[o]ne piece of evidence that may be relevant is the experience in Massachusetts, where employment-based health insurance coverage appeared to increase after that state's reforms, which are similar but not identical to those in the ACA, were implemented."13 In other words, many of the assumptions used in CBO's black box of cost modeling for "scoring" the cost of Obamacare were based on data drawn from Massachusetts.14

But there is one problem: the two laws are too unalike to allow for such a comparison. 15 Consequently, the variations in incentive structures placed on individuals, employers, and diverse sectors of the economy make it near impossible to draw meaningful comparisons. In addition, the starting lines from which states are beginning implementation run the gamut in terms of population characteristics, geography, and regulatory regimes.16 Any comparison should be done with extreme caution.

We should start with CBO's original projections, under which CBO estimated that:

[Nineteen] million residents would receive subsidies to the tune of $450 billion in the first ten years. …

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