Many of the provisions of the Affordable Care Act include provisions requiring health insurers to do certain things. Variability of premiums are regulated, certain services are mandated (e.g., free annual check-up) and minimum benefits packages are set on the health insurance exchanges. One seemingly innocuous provision of the ACA is that children are allowed to remain on their parents health insurance up until the age of 26. What is the cost of this provision?
We exploit the fact that some states had dependent care mandates in years prior to the passage of the ACA. Using data from the Survey of Income and Program Participation (SIPP), we find that workers at firms with employer-based coverage – whether or not they have dependent children – experience an annual reduction in wages of approximately $1,200 [my highlighting]. Our results imply that the marginal costs of mandated employer-based coverage expansions are not entirely borne only by the people whose coverage is expanded by the mandate.
Although mandates due clearly provide benefits–in this case for young adults aged 19-26 who can now stay on their parents insurance plan–the cost of these regulations is often underappreciated.