Covered and Happy: The Mental Health Effects of the Affordable Care Act's Dependent Coverage Provision

Largely due to the Affordable Act Act (ACA), the percentage of uninsured Americans has dropped from 16.1% in 2009 to 11.4% in 2015. A central question in health economics and policy is how the ACA affects the health of both those that gain health insurance and those that were already covered. The Oregon Health Insurance Experiment finds that those randomly made eligible for Medicaid insurance do not experience significant improvements in health with the notable exception that mental health improves greatly. However, two recent studies of the 2010 dependent coverage provision of the ACA - the first piece of the ACA to go into effect - in which dependents may remain on their parents’ plan until age 26 find conflicting results. Courtemanche et al. (JHE, 2015), using Behavioral Risk Fact Surveillance Data and a difference-in-differences methodology, find no significant improvements in mental health before and after the dependent coverage provision. On the other hand, using the same estimator but with data from the Hospital Cost and Utilization Project on inpatient hospital stays, Simon et al. (JHE, 2015) find a 9% increase in mental health related hospital visits before and after the policy. In this paper, we evaluate the extent to and mechanisms by which the ACA dependent coverage provision changed the mental health of those gaining insurance and those eligible for coverage. In contrast to other studies that rely on repeated cross-sections, we exploit the panel nature of the Medical Expenditure Panel Survey to document how the mental health of 23-25-year-olds evolved relative to 27-29-year-olds. Overall, we find that various measures of mental health improved by an average of 2.6%. These results are robust to various robustness checks and placebo tests. Our main effects are largely driven my improvements in the mental health of college educated men. Interestingly, while the dependent coverage provision is found to increase health insurance rates overall, we do not find health insurance increases in college-educated men. We show that one possible explanation for the improvement in mental health without an increase in health insurance could be a labor supply effect - the policy is found to reduce the labor supply of college educated men, and leisure is a normal good. Another explanation could be that the policy creates an option value of health insurance for college educated men that already have insurance, although we see no increase in job mobility due to the policy. Finally, we explore the extent to which the composition of the labor force changed - if unhappy workers quit, the remaining pool of full-time workers may be of better mental health.