Massachusetts Health Insurance Mandate Could Trigger Harsh Unintended Consequences
Study Finds Low-Skill Employees and Minorities Hit Hardest By Job Loss Under Mandated Health Coverage
Publication Date: June 2005
Topics: Health Care
Boston, Mass – Low-skill employees could see dramatic job loss from a health insurance mandate under consideration in the Massachusetts legislature. A new Employment Policies Institute (EPI) study looks at the potential labor market consequences of health insurance mandates with which many state legislatures are experimenting as a solution to reducing the number of the nation’s uninsured.
The study found a consensus among economic literature on mandated benefits suggesting that employers, wherever possible, will transfer the cost of a new mandate onto employees in the form of reduced wages. With nearly 43 percent of the uninsured working within three dollars of the minimum wage, employers will likely eliminate these jobs altogether in favor of automation and self-service. Others will hire more efficient employees to replace less-skilled workers.
If health care mandates were adopted across the country, the study finds that approximately 315,000 employees would lose their job as a result of the mandates. Traditionally vulnerable groups would bear a disproportionate burden of the job loss. For example, more than half of these employees will be nonwhite while only 25 percent of the workforce in the study sample was nonwhite. In addition, one-third of job losers will have less than a high school education.
The study also concluded that health insurance mandates focusing on large sized firms are a poorly targeted method of reaching the uninsured. Employees in small firms are disproportionately more likely to lack insurance with fully 45 percent of uninsured employees working in firms with fewer than 25 employees, despite these employees representing only 23 percent of the labor force.
The EPI study was conducted by Dartmouth University Associate Professor of Economics Katherine Baicker and Research Assistant Professor at the Institute for Social Research at the University of Michigan Helen Levy and is available on the EPI website at www.EPIonline.org.
“Mandating employer coverage from large firms is a poorly targeted method of reaching the uninsured and will lead to significant layoffs, particularly for low-skill and minority employees,” said EPI Director of Research Craig Garthwaite. “Lawmakers who truly wish to address the problem of the uninsured must look towards more efficient means of achieving their goals, such as enrolling the eligible uninsured in existing programs or expanding eligibility of low-cost insurance.”