The Affordable Care Act and Job Lock
Do you know what World War II, the Affordable Care Act, and about 800,000 Americans have in common?
Employer sponsored insurance really took off during wartime in the United States. World War II brought the nation a time of inflation. In response, the federal government controlled competition for scarce labor by creating wage and price controls. The 1942 Stabilization Act limited wage, but did not control employer provided insurance. Health insurance became a means to attract workers when employers could not significantly increase wages.
Fast forwarding to 2013 employer sponsored health insurance is causing job lock for some workers. Job lock is defined by the BusinessDictionary as “the inability of an employee to voluntarily terminate employment with a particular company because he or she would lose current health care benefits. This becomes an issue for individuals that have pre-existing health conditions that may not be covered under the new employer's health care coverage.”
The Affordable Care Act alleviates job lock by providing affordable insurance options. Employees with pre-existing conditions that needed to keep a job to keep their insurance will be able to purchase insurance in state exchanges. Furthermore, people with an entrepreneurial drive will have the opportunity to leave a job they kept solely for health benefits.
The National Bureau of Economic Research distributed a recent study that estimates the impact of the ACA on employment lock. The researchers estimated between 840,000 and 1.5 million adults without children make wages below 200 percent of the federal poverty line and have employer sponsored insurance. With the ACA, they predict 530,000 to 940,000 will leave their jobs. The Congressional Budget Office estimates 800,000 people will leave their jobs which is a 0.5 percent decline in the employment rate. This drop is not due to people losing jobs, but choosing to leave because they no longer have to work for health benefits.