Do Work Decisions Among Young Adults Respond to Extended Dependent Coverage?

Abstract

Young adults aged 19–29 are significantly less likely to have health insurance since most family insurance policies cut off dependents when they turn 19 or finish college. Between 2003 and 2009, several U.S. states relaxed their eligibility requirements to allow young adults to remain covered under their parents’ employer-provided health insurance policies. For those who qualify for these benefits, the expansion of dependent coverage partially reduces the value of being employed by a firm that provides health insurance or of working full-time, as adult children can now obtain health insurance through an alternate channel. We employ quasi-experimental variation in the timing and generosity of states’ eligibility rules to identify the effect of the policy changes on young adults’ labor market choices. Our results suggest that the expansion increases the group dependent coverage rate and reduces labor supply among young adults, particularly in full-time employment.

Keywords: Young adults; Health insurance; Group dependent coverage; Labor supply; Full-time employment

JEL Classification: H75, I18, J21