ACA's Effect on Employment Debated

By Greg Goth Feb 4, 2016

The latest research on the effects of the Affordable Care Act (ACA) on the U.S. labor market is finding there isn't much support for detractors of the ACA, at least not yet. Critics of the statute contend it’s too early to say what the long-term impact will be.

An overview of research done in the past year on the Affordable Care Act and employment finds little proof that the ACA is hampering employment, said Robert Kaestner, professor in the Institute of Government and Public Affairs of the University of Illinois at Chicago. “While there was a great concern that the ACA might adversely affect employment—for example, by increasing part-time jobs or making people already working part-time not be able to get full-time work—there is very little evidence that this is occurring. If it is occurring, it is quite small and hard to detect from a statistical framework.”

The mandate for employers to provide ACA-compliant health care coverage to full-time employees took effect in January 2015 for employers with 100 or more full-time employees or part-time equivalents, and in January 2016 for midsize employers with the equivalent of 50 to 99 full-time employees.

Two studies on ACA and jobs were published in the January 2016 edition of the journal Health Affairs.One of the articles examined whether the ACA's employer mandate would cause a large shift from full-time to part-time work and a reduction in hours worked by part-time employees; the other examined whether the expansion of Medicaid under the ACA caused low-paid workers to quit their jobs or work fewer hours in order to qualify for benefits or to take another route, such as starting their own business.

Both studies were based on data from the U.S. Census Bureau's Current Population Survey, using a 60,000-household database. Neither found that health care reform had significant nationwide effects on the job market:

The study examining whether employers in 2015 shifted workers to part-time status to avoid the employer mandate found no increases in the probability of working either 25 to 29 hours or fewer than 25 hours per week. “We … did not observe a large reduction in 2015 (or in 2014, for that matter) in the frequency of working 30-34 hours, as one might expect if employers affected by the mandate reduced hours for workers just above the 30-hour threshold,” the researchers noted.

Another analysis, conducted by the ADP Research Institute, an affiliate of payroll services firm ADP, was released in June 2015 and looked at nationwide employment trends. It found there was little to no change indicated across comparable quarters in 2013 and 2014, as large employers prepared for the mandate to take effect in 2015.

Kaestner contended that, for now, “with the Affordable Care Act, you can rule out any types of meaningfully negative effects, and I think it is important that this has come from several different projects approaching the problem in different ways.”

Other Employer Consequences

Sara Collins, vice president for health care coverage and access at The Commonwealth Fund, a private foundation that promotes access to affordable health care, said her organization has published new research that also suggests the ACA has had no net negative economic impact and, in fact, has likely helped to stimulate growth by contributing to the slower rise in health care costs. Longer term, whether or not employee access to insurance will lower employers’ medical bills and improve productivity will be a complex calculation to make, she explained.

“We're really at a very early stage of looking at the effects,” Collins said. Small businesses exempt from the ACA’s employer mandate “have really struggled to offer coverage that was too expensive prior to the ACA going into effect,” she noted. These businesses “can now make a decision about whether they want to offer health insurance or have their employees get coverage through the [ACA’s public] marketplaces. So you would have expected, if anything, to see the benefits of increased access to health insurance actually be a benefit for employers, because greater numbers of people working for them actually have access to insurance.”

Understandable Angst

Some evidence detailing ACA-related job and/or hour reductions does exist, of course, notably in examples like an Investor's Business Dailytally of entities that have cut hours or eliminated positions.

“We have not seen as many job losses as we thought we might,” Michael Tanner, a senior fellow at the libertarian Cato Institute in Washington, D.C., wrote last year. “In part, this is because the recovery took hold at the same time the ACA was being implemented. Job creation from renewed economic growth has camouflaged any job losses from the ACA. And, in part, it is because American companies have proven remarkably adaptive. Even so, there is evidence that the ACA is costing at least some jobs or causing businesses to shift workers from full- to part-time.”

A 2015 survey by the National Small Business Association (NSBA), a small-business advocacy organization in Washington, D.C., found that 25 percent of small employers said they were not growing due to the ACA, but that was down from 33 percent in 2014. Meanwhile, 12 percent said they were hiring more part-time workers due to the ACA (down from 14 percent), and 7 percent were reducing employee hours (down from 10 percent).

In response to the January Health Affairs study finding scant evidence that employees were being shifted to part-time status, posted comments cited personal experiences that contradicted that conclusion or claimed the findings were premature.

Kaestner cautioned that many factors must be considered when looking at labor market trends, and said he understood why there were those who feared the ACA might indeed squelch job growth.

“When the Affordable Care Act was passed, the unemployment rate was 10 percent,” he said. “So any hint that things were going to get worse raised sensitivity and concern. There were plausible reasons to think the ACA may have adversely affected employment. It's not just political rhetoric. The labor market is dynamic, and there are lots of things going on all the time. Our job as researchers is to sift through those noisy things and try to find a more systematic effect [of health care reform]. That's a tough job.”

However, “the anecdotes are anecdotes, and we all have lots of them” claiming employers have reduced employee hours or kept hiring below the 50 full-time employee level that triggers the ACA’s employer mandate. “That doesn't mean they reflect the greater trend or actual occurrence,” he added. “Although lots of employers fear this, and it may be going on, it's hard to disentangle, maybe, from other trends.”

Greg Goth is a freelance health and technology writer based in Oakville, Conn.​

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