Mandated Incentives: The Impact of Firm Size Thresholds for Employer Mandates In Massachusetts

Massachusetts was the first state to achieve near-universal health care coverage through a combination of insurance market reforms, individual and employer mandates, and subsidies for health insurance premiums . The Massachusetts Health Care and Insurance Reform Law of 2006 (MHCI) aimed to expand access to health coverage without significantly affecting the traditional provision of health insurance coverage by employers. Examining the extent to which the Massachusetts reform has altered pathways to health coverage for lower-income workers is not only important for evaluating the impact of the Massachusetts reform, but also provides critical insight into the potential effects of the Affordable Care Act, which includes strikingly similar reform elements. This paper takes an in-depth look at the MHCI by examining the extent to which more lenient mandates on small firms have differently impacted the movement of their workers onto government-subsidized insurance rolls. I find that employees of small firms generate most of the new subsidized coverage take-up. Additionally, my lower-bound estimates reveal that one of every two small-firm workers covered by subsidies would have obtained employer-sponsored insurance had their firm been subject to the more stringent large-firm mandate. The trade-off to applying a more stringent mandate on small firms would have resulted in a six-percent decrease in overall health insurance rates for small-firm workers.