ACA Effects on the Labor Market: Is Massachusetts a Guide?

“Yes” says the Dept. of Health and Human Services. So does the Urban Institute. Both sources are predicting only modest effects from an expensive ObamaCare mandate, backed by a $3,000 potential penalty and very high implicit marginal tax rates. But Casey Mulligan says not so fast:

As long as they do something like the 125 plan to help their employees use the federal tax exclusion, Massachusetts employers are only nominally responsible for the “affordability” of health insurance or for failures of their employees to take advantage of the plan offered. The Massachusetts penalty is only $295 per employee-year (as far as I can tell, it is business tax-deductible, which makes the $295 less than one-tenth of the federal penalty); it can be avoided by an employer that makes nominal contributions to its employees’ premiums and induces enough employees to participate‚Ķ

[T]he federal law will put very different pressures on employers and employees than the Massachusetts law does. It would be unwise to assume that next year’s national labor market will follow the patterns that the labor market in Massachusetts experienced after 2006.

Comments (10)

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  1. Joe S. says:

    Good post. First time I have seen these points made.

  2. bart says:

    I’ve always imagined ACA as a sort of parody of Romneycare, with extreme exaggeration of a few “key” points while glossing over more subtle differences in typical of a parody.

  3. Carl says:

    Very interesting post. Im curious to see if the ACA ctakes the same route as Romneycare. I cant imagine that it could be successful on such a large scale like the U.S.

  4. Benedict Popplewell says:

    As much flac as Romney got for the Massachusets health system he created, maybe Obamacare should have copied it a little more. I like the idea of the deduction for the penalty.

  5. Hoover says:

    This is more than interesting, 10 times the cost for employers will have huge effects on the labor markets.

  6. Kyle says:

    We’ve already seen that there are no federal reservations about tampering with BLS data regarding employment rates. It seems they would only follow the MA labor statistics if they favored the administration.

  7. Simpleton says:

    “Both sources are predicting only modest effects from an expensive ObamaCare mandate, backed by a $3,000 potential penalty and very high implicit marginal tax rates.”

    – These penalities will kill small businesses… the engine of economic growth in this country.

  8. Gabriel Odom says:

    I’d like to nominate the Fallacy of Composition as the Logical Fallacy of the Year. I’m seeing it everywhere these days.

    Just because Romneycare sort-of works in Massachusetts does NOT imply that ObamaCare will work everywhere else.

  9. Anthony Sombers says:

    I do not see how this logic would mean that somehow Romeney care will work all states since it somewhat worked for Massachusetts.

  10. Ryan says:

    Interesting post. However I do not think any of this will work until the entire system is overhauled.