Look for the Rise of “Job Lock” under ACA Repeal and Replace

March 7, 2017; New York Times

There are a whole host of reasons why the Affordable Care Act (ACA) replacement needs to be vetted carefully, but its impact on the job market may actually get the attention of ACA naysayers. Health reform helped combat “job lock,” a term that’s not necessarily commonplace but describes a situation that will likely seem familiar.

Job lock occurs when people who might otherwise wish to start their own businesses, switch jobs, go part-time, or retire are prevented from doing so because they will lose health insurance coverage. In fact, in a pre-ACA survey conducted by the Employee Benefit Research Institute, a quarter of the employees surveyed indicated that health insurance was “the reason they or an immediate family member passed up an opportunity to change jobs or retire.”

With ACA subsidies, health insurance is largely affordable by low- to median-income individuals or those with decreased income. For instance, federal subsidies ensure policies cost less than 10 percent of an individual’s income. Other subsidies limit the cost of deductibles and co-pays. Close to 7 million individuals who do not qualify for subsidies are still able to purchase affordable insurance plans.

In a report by the Urban Institute, researchers postulated that, “Because health reform will allow for considerably more flexibility, the movement from job to job will make the labor market more efficient and will increase economic productivity.” With flexible coverage, the result is more productive workers who progressively move within the job market and exit when they are no longer able or willing to be productive. For some, this means early retirement; for others, it means the ability to not work and focus on healing in the face of illnesses such as cancer.

Post-ACA surveys indicate that these presumed impacts on the job market are in fact accurate. In a 2015 survey by Thumbtack of 5,400 small business owners, over 30 percent of respondents indicated that they were able to launch their businesses because of access to healthcare afforded to them by the ACA. Further, information from the Center of Economic and Policy Research indicates that voluntary part-time employment is up 10 percent since pre-ACA times.

On Monday, the House Ways and Means and Energy and Commerce Committees revealed their proposal, which essentially replaces ACA subsidies with tax credits. These tax credits, however, are based on age as well as income level, so that older Americans receive more subsidies but also carry much of the financial burden. This has further implications on job lock, as older Americans facing high healthcare costs would likely need to continue working longer and put off retirement. Repealing the individual mandate, which the GOP has vowed to do, can also contribute to job lock. With fewer people enrolled in individual plans, the market will shift to offer fewer options and higher costs. Some estimates put this increase at eight percent. With higher premiums, individuals may be better off working full time at a company that offers employee benefits. Thus, we’d likely see a return to pre-ACA times in terms of entrepreneurship, early retirement, and voluntary part-time employment.—Sheela Nimishakavi