Policy A: Affordable Care Act

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Introduction

According to the background of the Affordable Care Act, this paper would analyze the effect of policy A that raises the age for which young adults could stay on their parent’s employer-sponsored health plan. Section 1 would review the background and young adults’ coverage of the ACA. Thus, section 2 and section 3 would give some potential benefits and concerns of policy A, respectively. Finally, section 4 would analyze the effects of policy A based on experimental results, using descriptive statistics and the Difference-in-differences method.

Coverages of the ACA

There are four main coverages in ACA legislation. Employer-Sponosred Coverage will be discussed in more detail below. Other coverages are through social programs, such as Medicaid, which is supported by the federal government. In this case, medical care is provided to people with incomes below the official poverty line. Finally, subsidized marketplaces can also provide coverage. Their responsibility extends to people with moderate income.

Employer-Sponsored Health Insurance and Young Adults in the ACA

Employer-sponsored health coverage refers to the health insurance for employee obtained by employer. In the U.S., it is normally Affordable Care Act that requires the employers insure their employee’s minimum essential health coverage with at least 50 full-time employees or full-time equivalents (Edward G., Craig A., Elonda C., & Emily M., 2010). Meanwhile, the ACA also protects the minimum essential health coverage of employees’ family. Plans and issuers of plans could not remove adult children from their parents’ coverage until they reach the age of 26, whatever married or unmarried. Once the young adults reach 26 and age out of their parents’ coverage, they could choose to enroll in any other employer plan that they are eligible.

Statistics

Benefits

From private perspective, policy A that raises the age for which young adults can stay on their parents’ employer-sponsored health plan from age 26 to age 27 might provide at least the following benefits:

The young adults could have less concerns about the situation that they out of the minimum health coverage due to unemployment if graduating from school. Staying on their parents’ employer-sponsored health plan, they could obtain the required health coverage, even through they were not enrolled in the other employer health plan.
On the other hand, policy A could also lower the financial risk of young adults or the family with a young adult. According to the statistics of Center for Medicare & Medicaid Services (CMS), almost one in six young adults suffer a chronic illness (cancer, diabetes or asthma etc.). Moreover, around half of uninsured young adults report those health problems. If staying on their parents’ employer-sponsored health insurance, those young adults or their family could face less financial risk due to physical problems.

Heath Insurance Premiums

From social perspective, the largest benefit of policy A is the efficient addition of health insurance coverage. Based on the statistics of CMS, almost 30% of young adults are not included in any health insurance. With the highest uninsured rate among any age group, uninsured young adults who are age at 20 to 30 represent over 20% of total population uninsured. The implementation of policy A could efficiently raise the health coverage in the U.S.

Concerns

The implementation of policy A would also affect the employment decisions of both employee and employer as the following:

The employers are required to offer the health insurance to their employees. If policy A has been implemented, they would afford a larger administration costs for their employees. Employers might choose to employ less labor with a consideration of costs. Thus, policy A might affect the demand in labor market.
On the other hand, employees and potential employees would have less incentive to enter the labor market for a job with a more comprehensive social welfare. Thus, the supply of labor would also decrease.

Unemployment Rates

Therefore, the labor market would reach a new equilibrium in which less population would be employed with a higher welfare in the aspect of the whole society. Moreover, it is proved that a higher social welfare would bring an increase in unemployment rate. Compared to the U.S. where the most of people must afford the whole or a part of healthcare costs, most of European countries provide their people with universal health care by tax revenues. Nonetheless, the unemployment rate of the U.S. in 2019 is 3.8% while this figure of the EU is 6.9%. Facing a higher cost of labor, employers would definitely cut off their employment scale. Moreover, they might also instead the full-time employment of the part-time employment. Both of the two choices would decrease the total employment scale.

Impacts from Policy A Based on Empirical Treatment

Impacts from Policy A based on Empirical Treatment

As showed in the following graph, control group have a higher average number of physician visits in each quarter before the implementation of policy A, compared to treatment group (Treatment group stays on parent’s health plan between the ages of 26~27 years while control group does not). But the situation has been reversed by policy A. The average number of physician visits of treatment group increases rapidly and deviates far from this figure of control group. This phenomenon might mean that the abuse of public medical resources due to moral hazard of the insured.

Impacts from Policy A based on Empirical Treatment

In contrast, the health status of treatment group also deviates upward far from that of control group. In other words, the policy A might really improve the health status of treatment group. But measuring the success of a policy should consider both its costs and results.

Difference-in-Differences Method

Difference-in-Differences method

With a Difference-in-Differences method, this paper analyzes the impacts from policy A on the utilization of medical resources and health status. There are the general view of this method, including the graph and regression model for calculations. This method is often used for this kind of tasks and is relevant (Saeed et al., 2019).

Difference-in-Differences method

As showed in the following table, the average number of physician visits of both treatment group and control group have increased. But this figure increased with a higher velocity for treatment group. Moreover, the deviation between these measurements of both groups has been raising. Thus, it is obvious that the implementation of policy A might increase medical demand of the insured. However, the reason of increasing medical demand is complicated.

It might result from over-usage of medical resources due to patients’ moral hazard even they were not in serious physical conditions. On the other hand, it might also refer to the potential demands’ meeting. Out of employer-sponsored health insurance, some young adults may not obtain necessary medical treatments before the implementation of policy A. However, their demands have been met because of policy A.

In contrast, the treatment group also shows a better self-reported health status under the same method. The average points of the treatment group are higher than that of control group by 8 points. Thus, it is proved that policy A actually improves the health status of young adults as showed in the following table.

Conclusion

In a summary, this policy is relatively successful, although it brings some problem due to patients’ moral hazard. Nonetheless, policy A makes more medical demand of young adults has been met and improve the overall health status of the whole treatment group. But it does not represent that policy A is perfect. Many facts (over-usage of medical resources, impacts on unemployment rate etc.) should be investigated and measured for amendment of policy A.

References

Claxton, G. (2018). Annual average premiums graph 1999–2018 [Diagramm]. Health Affairs. Web.

Erica. (2019). Difference-in-differences estimation [Illustration]. Aptech. Web.

Eurostat. (2021). EU unemployment rates [Diagram]. Euroindicators. Web.

Gerwyn, N. (2019). Mechanical description [Illustration]. Medium. Web.

Long, M., Rae, M., Claxton, G., & Damico, A. (2016). Trends in Employer-Sponsored insurance offer and coverage rates, 1999–2014 [Diagramm]. Kaiser Family Foundation. Web.

Saeed, S., Moodie, E. E., Strumpf, E. C., & Klein, M. B. (2019). Evaluating the impact of health policies: Using a difference-in-differences approach. International Journal of Public Health, 64(4), 637-642.

Tolbert, J. (2015). Key coverage elements in the ACA. Kaiser Family Foundation. Web.

US Bureau of Labor Statistics. (2020). US unemployment rate. BBC. Web.

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