The Effect of the Massachusetts Health Reform on Employer Sponsored Insurance and Labor Market Outcomes

Abstract

Abstract This paper studies the effect of the employer mandate in the 2006 Massachusetts health reform on employer sponsored insurance (ESI) coverage, part time work, and wages. While ESI coverage is associated with an increase in health insurance coverage, traditional economic theory predicts that the increase in costs to employers will result in a shift towards part time work or a decrease in wages. Using CPS data from 2000-2013 and a difference-in-difference approach, this paper finds that the employer mandate increased ESI coverage, slightly increased part time work, and had no meaningful effect on wages. These effects were largest for low skill and low income workers. This paper adds to the literature by using all years of data available to determine the effects of the reform, and by studying a combination of outcomes to generate a complete analysis of the reform’s impact. These results imply that while reforms that include employer mandates can be successful in increasing insurance coverage, they also increase the risk of labor market distortions, especially among low income and low skill individuals.