The Effect of Health Insurance Mandate on Labor Market Activity and Time Allocation: Evidence from the Federal Dependent Coverage Provision

Abstract

The primary goal of the federal dependent coverage mandate was to increase health insurance coverage among young adults, the group with the lowest prevalence of health insurance coverage. To understand the full impacts of the federal dependent coverage mandate, it is important to evaluate how the mandate affects labor market activities and time spent away from work among young adults. Using data from the Consumer Population Survey (CPS) and the American Time Use Survey (ATUS) and implementing a difference-in-differences framework, we find: 1) Young adults substitute employer sponsored insurance for dependent coverage, 2) Affected individuals reduce their work time and switch from full- to part-time employment, and 3) The additional time from reduced labor market activity is reallocated towards more time spent on leisure activities. The effects of the mandate on labor market activities are stronger in later years. Furthermore, we show that young adults do not increase the time they spend on activities that could enhance their human capital such as education and health, which reemphasizes potential unintended consequences of the mandate. These findings suggest that future work is necessary to fully understand the overall welfare effects of the policy.