Do more health insurance options lead to higher wages? Evidence from states extending dependent coverage

J Health Econ. 2014 Jul:36:84-97. doi: 10.1016/j.jhealeco.2014.03.012. Epub 2014 Apr 13.


Little is known about how health insurance affects labor market decisions for young adults. This is despite the fact that expanding coverage for people in their early 20s is an important component of the Affordable Care Act. This paper studies how having an outside source of health insurance affects wages by using variation in health insurance access that comes from states extending dependent coverage to young adults. Using American Community Survey and Census data, I find evidence that extending health insurance to young adults raises their wages. The increases in wages can be explained by increases in human capital and the increased flexibility in the labor market that comes from people no longer having to rely on their own employers for health insurance. The estimates from this paper suggest the Affordable Care Act will lead to wage increases for young adults.

Keywords: Dependent coverage; Education; Health insurance; Wages.

MeSH terms

  • Adolescent
  • Adult
  • Educational Status*
  • Family Health / economics*
  • Family Health / statistics & numerical data
  • Female
  • Health Benefit Plans, Employee / economics*
  • Health Benefit Plans, Employee / legislation & jurisprudence
  • Health Benefit Plans, Employee / standards
  • Humans
  • Insurance Coverage / economics
  • Insurance Coverage / legislation & jurisprudence
  • Male
  • Patient Protection and Affordable Care Act / economics*
  • Patient Protection and Affordable Care Act / standards
  • Salaries and Fringe Benefits / economics*
  • Salaries and Fringe Benefits / trends
  • Sex Factors
  • United States
  • Young Adult