How Does Health Insurance Affect Firm Employment and Performance? Evidence from Obamacare

Abstract

This paper studies how mandating employers to provide health insurance of a minimum quality and the associated increases in health insurance premia affect firm employment and performance. To do so, we use hand-collected firm-level employee health insurance data. We find that employers with greater exposure to the PPACA (“Obamacare”) reduce enrollments in their health insurance plans to a larger extent after the law was enacted. Employers achieve this reduction in enrollment by shifting employment composition from full-time to part-time employees. We further show that firms that are less likely to adjust their employment composition experience deterioration in performance.