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The Health and Wealth of a Nation: Employer-Based Health Insurance and the Affordable Care Act, by Nan L. Maxwell, Kalamazoo, MI: The W.E. Upjohn Institute for Employment Research, 2012

This book provides a valuable service by conducting an empirical assessment of the potential impacts of the 2010 Patient Protection and Affordable Care Act (ACA) on employer-sponsored health insurance (ESI). As the book notes, this legislation represents the first major reform of national health care policy in 45 years. The ACA specifies extensive changes in private and government provision of health care, including provisions related to the required amounts, types, and financing of health insurance and care. The law requires deep and broad changes in the U.S. health care system, but it largely leaves the relative roles of government and private institutions intact. As such, most U.S. residents will likely continue to receive health insurance and health care through ESI policies obtained through their own or a family member's job.

The book's focus on ESI therefore is well-placed. The empirical analyses rely on the California Health and Employment Survey (CHES), conducted in California during 2005-06. The survey provides information for 1 ,427 private-sector firms with five or more employees regarding their workforce, the detailed characteristics of their health plans, and employee benefits more generally. Importantly, firms are distinguished not only by size (number of employees) but also by the skill attainment of their workforce, as reflected in survey responses regarding the educational and experience requirements of jobs in the firm. These data enable analyses of the different effects not only between large and small firms, which are explicitly distinguished in the law based on a cutoff of 50 or more full-time employees, but also between firms with primarily high-skill or low-skill positions, which corresponds closely to high-wage and low-wage jobs.

Early chapters of the book provide an extensive discussion of the pre-reform features of U.S. health care provision and the history of ESI, including its primary origins during World War II and the factors underlying its subsequent spread. I found the background discussion to be one of the book's strongest features, providing a cogent explanation of and compelling backdrop for the subsequent discussion of the ACA' s likely effects on ESI markets. The book also provides extensive discussion of the specific features of the ACA that are likely to affect employer and employee incentives surrounding ESI. Although the key information all appears to be present, I found it somewhat difficult to absorb, either because it is spread out over multiple chapters and subsections, or else simply because the legislation is complicated and therefore difficult to describe in a straightforward manner.

The main findings of the analyses revolve around differential effects of the ACA on ESI for small versus large firms and firms with a preponderance of low-skill versus high-skill jobs. The ACA eventually requires that large firms offer ESI coverage to employees who work at least 30 hours per week and have at least three months of tenure or else pay a penalty. The author argues that coverage will be expanded for such employees under ACA, because many large firms do not currently offer them coverage. By contrast, the author argues that ACA support to the small firm group market will not generally incentivize small firms to expand coverage, largely because ESI is expensive and most small firms will not be eligible for the tax credit included in the legislation. This suggests that the ACA will widen the ESI coverage gap between small and large firms. Among employees covered by ESI, the ACA' s requirements for plan choice and features are likely to cause partial convergence in plan quality between low-wage and high-wage workers.

Like any analysis of the economic impacts of complicated legislation that is not based on direct observation, the book's conclusions are subject to caveats arising from an imperfect match between the data and analytical techniques available and the specific outcomes being analyzed. The CHES data used to infer likely employer responses to the requirements of the ACA have a couple of drawbacks. While the descriptive statistics suggest that the sample of California firms is broadly representative of national firms, there is no guarantee that the results for the California labor market will mimic those nationwide, given possible differences in the industrial distribution of large versus small firms and high- wage versus low-wage firms between California and the rest of the nation. More crucially, the survey responses pertaining to health plan offers are largely qualitative, which limits any inference about the likely size of employer responses to changes in the costs and requirements for ESI programs. Indeed, the key survey questions about ESI elicit responses based on opinions, such as the perceived likelihood that the firm will respond in specific ways to increased costs. It is likely that employers' responses under actual shifts in market conditions will differ from their speculative responses to such questions, limiting the inferences that can be drawn about post-ACA behavior.

My biggest concern about the analyses revolves around the assumption that the ACA will increase the costs of ESI provision, which forms much of the basis for the author's empirical predictions. As the book notes, a wide range of estimates of varying signs and magnitudes are available regarding the expected impacts of the ACA on the costs of ESI. This is especially important for smaller firms, which may benefit from the availability of tax credits and reduced ESI administrative costs. The book's conclusions could have been bolstered by more discussion of the likely correctness of the assumption of cost increases and corresponding implications for ESI outcomes. Indeed, the assumption that costs will increase implies a reduction in ESI and overall health insurance coverage, which suggests that the ACA may backfire in its goal of expanding health coverage. This is a critical and potentially controversial claim, and the arguments in the book would have been more convincing had the author grappled with it more.

Despite these caveats, the book represents a valuable initial foray and a useful basis or citation for subsequent work - which I hope will be voluminous - regarding the impacts of health care reform on ESI, related labor market outcomes, and health care outcomes more generally. Readers who are interested in conducting such analyses, or who are interested more generally in the likely effects of the ACA, should read this book.

AuthorAffiliation

ROBERT G. VALLETTA*

Federal Reserve Bank of San Francisco

* The views expressed are solely those of the author and are not attributable to other staff or management of the Federal Reserve Bank of San Francisco or the Federal Reserve System.

Word count: 1103

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Indexing (details)

Cite

Subject

Book reviews; Health insurance; Patient Protection & Affordable Care Act 2010-US

Location

United States--US

Classification

8210: Life & health insurance 4320: Legislation 9190: United States

Title

The Health and Wealth of a Nation: Employer-Based Health Insurance and the Affordable Care Act

Author

Valletta, Robert G

Publication title

American Economist

Volume

Issue

Pages

60-61

Number of pages

Publication year

2013

Publication date

Spring 2013

Year

2013

Section

BOOK REVIEW

Publisher

Omicron Delta Epsilon Fraternity

Place of publication

Los Angeles

Country of publication

United States

Publication subject

Business And Economics

ISSN

05694345

Source type

Scholarly Journals

Language of publication

English

Document type

Book Review-Favorable

ProQuest document ID

1371385688

Document URL

http://search.proquest.com.ezproxy2.apus.edu/docview/1371385688?accountid=8289

Last updated

2013-07-02

Database

2 databases

View list Hide list

· ABI/INFORM Global

· ProQuest Research Library

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