The Affordable Care Act and Uninsured Rates: Evidence from Massachusetts

Abstract

In 2014, the most substantial policies of the Affordable Care Act went into effect, including the individual mandate and the Health Insurance Marketplace. Massachusetts, however, had already undergone a similar legislative reform in the early 2000s. Using a difference-in-differences model, I estimate a 4.416% average decrease in county uninsured rates for counties similar to Massachusetts as a direct result of these major ACA policies. A significant decrease exists for all different sex, age, and income groups. These major policies caused more than half of the average drop from 14.78% to 7.52% in uninsured rates among treated counties similar to Massachusetts. Using an event study model, I confirm the pre-event trend between the treatment and control groups. I also measure the change in uninsured rates due to the ACA for each year, revealing a continual decrease from 2014 to 2017. Aside from a lagging effect of the 2014 implementation, the decrease in county uninsured rates over time is likely to be in part thanks to the ratcheting increase in individual mandate penalty between 2014 and 2016. Specifically, the penalty increase from $325 in 2015 to $695 in 2016 could be responsible for as much as a 0.5 percentage point decrease in county uninsured rates, implying that the penalty itself plays an integral part in the Affordable Care Act’s goal of expanding health insurance coverage. This is notable not only for health policy analysis, but also because, in the legal realm, it speaks to the severability of the individual mandate from the rest of the ACA.