NORMA B. COE UNIVERSITY OF WASHINGTON AND NBER GOPI SHAH GODA STANFORD UNIVERSITY AND NBER How Much Does Access to Health Insurance Influence the Timing of Retirement?

CBO: ACA  Large Reductions in Labor Supply `“CBO estimates that the ACA will reduce the total number of hours worked, on net, by about 1.5 percent to 2.0 percent during the period from 2017 to 2024, almost entirely because workers will choose to supply less labor—given the new taxes and other incentives they will face and the financial benefits some will receive.” Source: CBO (2014), Budget and Economic Outlook: , Appendix C: Labor Market Effects of the Affordable Care Act.

ACA Provisions Affecting Labor Supply 1. The subsidies for health insurance purchased through exchanges; 2. The expansion of Medicaid eligibility; 3. The penalties on employers that decline to offer insurance; and 4. The new taxes imposed on labor income. Source: CBO (2014), Budget and Economic Outlook: , Appendix C: Labor Market Effects of the Affordable Care Act.

Another Channel: ACA Rating Regulations Guarantee issue/renewability Rating variation based only on:  Age (3:1 ratio)  Premium rating area  Family composition  Tobacco use (1.5:1 ratio) Affects individual market, small group market, and exchange Source: Kaiser Family Foundation Summary of the Affordable Care Act, April 2013,

Regulations Will Affect Near-Elderly Retirees Prior to Medicare eligibility, retirees generally access health insurance from one of four primary sources:  Retiree health insurance from previous employer/union  Spouse’s employer  COBRA coverage  Individual market Regulations are likely to reduce premiums for older and sicker individuals in the individual market

Research Question and Empirical Strategy How do rating regulations affect the timing of retirement? Exploit variation in state regulatory environments over time to estimate the impact of regulations on retirement hazards  Code a state as having a “Strictly Regulated Market” if it has both guaranteed issue and community rating regulations in place (Herring and Pauly 2006)  Data on state regulations compiled from Kaiser Family Foundation (2010), Georgetown University Health Policy Institute (2004), and Wachenheim and Leida (2007)

Previous Literature Relationship between health insurance and retirement behavior  COBRA (Gruber and Madrian 1995, 1996)  Retiree health insurance  Reduced form (Karoly and Rogoski 1994; Rogowski and Karoly 2000; Johnson, Davidoff and Perese 2003; Gruber and Madrian 1995; Linsenmeier 2002; Marton and Woodbury 2006; Blau and Gilleskie 2001; Gruber and Madrian 2002; Nyce et al. 2013)  Structural models (Gustman and Steinmeier 1994; Rust and Phelan 1997; French and Jones 2011; Blau and Gilleskie 2006, 2008)  Public sector (Leiserson 2013; Shoven and Slavov 2013; Fitzpatrick 2013) Rating regulations and premiums (Herring and Pauly 2006; Belloff and Cantor 2008; LoSasso 2011)

Number of States with Strict Health Insurance Regulations

Health and Retirement Study, Linked to restricted geographic identifiers Hazard framework (following Behaghel and Blau 2012) Outcomes  Exiting the labor force  Retirement self-report  Claiming Social Security retirement benefits

Sample Restrictions Unit of observation: person-months Being in sample conditional on not having claimed, retired, or exited labor force in month prior to 60 th birthday Exit the sample via  failure (claiming, exiting, retiring),  death,  survey attrition,  reaching age 65 or calendar year 2010

Hypothesized Interactions Fair/poor health status: Since regulations usually decrease the premiums for sicker individuals, effect should be stronger among those in worse health status Spousal health insurance: Those with other sources of health insurance should respond less to regulations because they are less likely to obtain health insurance in the individual market

Effect of Strictly Regulated Non-Group Health Insurance Markets on Labor Force and Claiming Decisions, by age Age Panel A: Exit the Labor Market Strictly Regulated Market ** *** (0.0062)(0.0053)(0.0122)(0.0037)(0.0201) Mean of Dep Variable Adjusted R Observations26,29125,89322,86720,31319,160 Panel B: Self-Reported Retirement Strictly Regulated Market (0.0157)(0.0038)(0.0145)(0.0042)(0.0139) Mean of Dep Variable Adjusted R Observations29,64629,53623,45219,56217,226 Panel C: Claiming Social Security Strictly Regulated MarketN/A (0.0120)(0.0058)(0.0288) Mean of Dep Variable Adjusted R Observations 32,340 22,285 19,263 Standard errors in parentheses

Effect of Strictly Regulated Non-Group Health Insurance Markets on Labor Force and Claiming Decisions, by age and health status Age Panel A: Exit the Labor Market Strictly Regulated Market *** *** (0.0060)(0.0054)(0.0120)(0.0038)(0.0203) Strictly Regulated Market * Poor health * (0.0046)(0.0040)(0.0103)(0.0140)(0.0066) Panel B: Self-Reported Retirement Strictly Regulated Market (0.0154)(0.0037)(0.0146)(0.0047)(0.0139) Strictly Regulated Market * Poor health ***0.03*** (0.0038)(0.0033)(0.0061)(0.0095)(0.0039) Panel C: Claim Social Security Strictly Regulated MarketN/A (0.0121)(0.0059)(0.0285) Strictly Regulated Market * Poor health * * (0.0055) (0.0065) (0.0043) Standard errors in parentheses

Effect of Strictly Regulated Non-Group Health Insurance Markets on Labor Force and Claiming Decisions, by age and spousal access to health insurance Age Panel A: Exit the Labor Market Strictly Regulated Market ** *** (0.0063)(0.0051)(0.0122)(0.0039)(0.0196) Strictly Regulated Market * Has access to Spousal HI *0.0092**0.015* (0.0022)(0.0028)(0.0043)(0.0041)(0.0086) Panel B: Self-Reported Retirement Strictly Regulated Market * (0.0157)(0.0043)(0.0141)(0.0045)(0.0126) Strictly Regulated Market * Has access to Spousal HI ***0.0081*0.0119* (0.0032)(0.0028)(0.0044)(0.0040)(0.0066) Panel C: Claim Social Security Strictly Regulated Market ** (0.0118)(0.0051)(0.0292) Strictly Regulated Market * Has access to Spousal HI *** (0.0034) (0.0042) (0.0066) Standard errors in parentheses

Next Steps Sensitivity analysis by current source of health insurance Understand intensive measure responses on hours of work/FT status Obtain average individual health insurance prices by state and year from MEPS  Instrument with regulatory environment Incorporate state-level changes in Medicaid eligibility

Implications for ACA and Retirement Little evidence that regulatory environment influences retirement timing Effects of ACA on retirement behavior may depend more on changes in retiree health insurance and employer-sponsored health insurance