The Impact of Obamacare on Firm Employment and Performance: Theory and Evidence

Abstract

We study the impact of the Patient Protection and Affordable Care Act (PPACA, or Obamacare) on firm employment and performance using hand-collected firm-level employee health insurance data. PPACA is associated with a significant increase in health insurance premia for employees in company-sponsored health insurance plans. We show theoretically and empirically that employers with higher employee coverage on their health insurance plans prior to the PPACA reduce enrollment in these plans after the law was enacted. In addition, the reduction in employer-sponsored health insurance plan enrollment is more pronounced for employers that used to offer basic, low cost health insurance plans to their employees. We also find suggestive evidence that firms reduce enrollment by shifting their employment composition from full-time employees to part-time, temporary, or seasonal workers, who are not covered in employer-sponsored health insurance plans. We do not find any evidence of deterioration in performance at companies that were more exposed to PPACA.