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New Study Finds Major Economic Benefits Of The Affordable Care Act (Young Adults, You Definitely Want To See This!)



The latest good news about the Affordable Care Act comes from a new study published in the Journal of Health Economics. Lead researcher Marcus Dillinger of the University of Texas at Austin found that the health care law, which allows young adults to remain on their parents’ health insurance plans until they turn 26, will help give those same young people the flexibility they need to pursue new educational and career opportunities. That’s exciting enough on its own, but the really good news is that this will ultimately end up boosting young adults’ incomes by about four percent.

To reach their conclusions, researchers studied existing state laws that were in place before the Affordable Care Act. Before the Affordable Care Act required all employers to provide health insurance to employees’ children until the age of 26, many states passed reforms that extended dependent coverage to young adults. The investigators used these policies to make predictions about the nationwide impact of the ACA’s young adult provisions.

After analyzing the impact of these laws, researchers found that the young people who were at least 18 years old when their state enacted the provision saw a wage increase by about two percent on the earnings they made after the age of 22.

Dillinger explains the findings, saying that the increase in wages was the result of increased flexibility that allowed young adults to make different decisions about their education and early careers. Since they were covered by their parents’ health insurance and didn’t have to worry about figuring out how to get a plan of their own, young adults were free to make decisions that were normally not available to them. For example, in some cases, their college tuition was cheaper because they no longer had to purchase a student health plan to get coverage. In other cases, they had the freedom to accept nontraditional jobs that didn’t offer insurance – such as internships in their career field. And young adults were also more likely to go back to school in their early twenties because they didn’t need to find full-time work just to gain access to health benefits.

Importantly, the researchers found that these wage increases “largely persist” even after young adults turn 26 and no longer qualify for their parents’ plans. Extrapolating these findings to determine how they will play out on a national level, researchers concluded that young Americans will see “sustained” wage increases closer to four percent.

Thanks to the ACA, millions of young adults have gained coverage through their parents' insurance plans. Recent research shows that this will yield significant long-term economic benefits.

Thanks to the ACA, millions of young adults have gained coverage through their parents’ insurance plans. Recent research shows that this will yield significant long-term economic benefits.

Young adults have traditionally had the highest uninsurance rate of any age group, but over the past several years, millions of young adults have gained access to health care through the Affordable Care Act. The uninsurance rate among Americans between the ages of 18 and 25 has declined steadily in recent years, dropping to just 19 percent in 2014.

Young adults aren’t the only ones who will reap the economic benefits of the health reform law. Another recent study found that the Affordable Care Act’s private insurance subsidies and Medicaid expansion will have the effect of raising the poorest Americans’ incomes by at least five percent. Furthermore, the latest figures from the U.S. Department of Commerce’s Bureau of Economic Analysis show that the provisions of the new health care law are already boosting people’s personal incomes and spending. And thanks to the security of coverage under the ACA — which gives Americans of all ages more workplace flexibility — people will be have the freedom to switch to part-time work in order to go back to school, leave a job in order to start a business, or move to a better job, perhaps at an employer that does not offer coverage. Recent reports show that the health care law will even help people retire sooner if they want to.  By increasing workers’ mobility across jobs, secure access to health insurance helps them to find the job that is best for them—and thus increases overall wages and productivity. Moreover, reducing job lock encourages entrepreneurship, a critical ingredient for growth and job creation.

On top of these benefits, the Affordable Care Act also offers a major boost to the overall economy. The provisions of the ACA make it easier for families to access health care services and to meet other pressing needs, which will increase the demand for goods and services throughout the economy at a time when the unemployment rate is still elevated. For this reason, as CBO Director Doug Elmendorf testified, the ACA “spurs employment and [will] reduce unemployment over the next few years.”

The historically low rate of health care spending growth will contribute to the economic benefits of the ACA.

The historically low rate of health care spending growth will contribute to the economic benefits of the ACA.

Moreover, the health care law is contributing to a historic slowdown in the growth of health care costs. From 2010 to 2012 real per-capita health spending grew at an average annual rate of just 1.1 percent, and preliminary data and projections imply that this slow growth continued in 2013. The spending growth rates recorded over the last few years are the slowest on record, and less than one-third the long-term historical average of 4.6 percent that stretches back to 1960.

Slower growth in health care costs reduces the growth of the health insurance premiums paid by employers, which has important benefits for workers. In the short run, lower health insurance premiums reduce the cost of hiring an additional worker, making it easier for employers to add jobs. One study co-authored by a leading health economist found that reductions in health care cost growth due to health care reform could increase job growth by 250,000 to 400,000 per year by the second half of this decade.

Economic research shows that, over time, an increasingly large fraction of the premium savings are passed on to workers in the form of higher wages. If only one-third of the recent slowdown in health care cost growth persists, the savings after a decade will amount to $1,200 per person, much of which will show up in worker’s paychecks as higher wages.

Just today, an article in the conservative Wall Street Journal touted the economic benefits of the Affordable Care Act. According to the WSJ, Alec Phillips, economic researcher at Goldman Sachs, recently reported that “subsidies from the Affordable Care Act boosted gross domestic product during the first quarter and are likely to do the same during the second quarter.” Thanks to the subsidies, Americans saw a $37 billion boost in personal income during the first quarter — and this increase is expected to continue into the second quarter and pick up in 2015 and 2016 as enrollment increases.

The latest research shows that the Affordable Care Act is not only helping to alleviate disparities in access to health care, but it’s also improving the fiscal outlook for millions of hardworking Americans at a time when economic and income inequality are at historic highs.

As President Obama said last fall, “there are few things more fundamental to the economic security of the middle class and everybody who’s trying to get into the middle class than health care.

And thanks to the Affordable Care Act, the economic security of health insurance is benefiting more and more Americans every day.


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