Joint Labor Search, Spousal Insurance, and Health Care Reform

(with Andrew Shephard)

Abstract

Health insurance in the United States for the working age population has traditionally been provided in the form of employer-sponsored health insurance (ESHI). If employers offered ESHI to their employees, they also typically extended coverage to their spouse and depen- dents. Provisions in the Affordable Care Act (ACA) significantly alter the incentive for firms to offer insurance to the spouses of employees. We evaluate the long-run impact of ACA on firms’ insurance offerings and on household outcomes by developing and estimating an equi- librium job search model in which multiple household members are searching for jobs. The distribution of job offers is determined endogenously, with compensation packages consist- ing of a wage and menu of insurance offerings (premiums and coverage) that workers select from. Using our estimated model we find that households’ valuation of employer-sponsored spousal health insurance is significantly reduced under ACA, and with an “employee-only” health insurance contract emerging among low productivity firms. We relate these outcomes to the specific provisions in the ACA.