Employer responses to the Massachusetts mandate

The employer mandate in Massachusetts has a very weak penalty, just $295 per employee per year. That’s far below health insurance premiums and the ACA’s penalty. One might think that employers in Massachusetts would drop insurance coverage and pay the tiny penalty instead. Nope.

In their recent NBER paper, Colla, Dow, and Dube wrote a useful paragraph about employer responses to the Massachusetts employer mandate:

Based on a pre-post comparison from a Massachusetts household survey, Long and Masi (2008) found no evidence of dropped coverage or restricted eligibility, and no major changes in the scope of benefits, network of providers, cost to employees or quality of available care under health plans. They also found that employer sponsored coverage had expanded due to increased take up among employees. Gabel and colleagues surveyed Massachusetts employers, finding that the percentage of firms with 3 or more employees offering health benefits increased from 73 to 79 percent, that there was an increase in firms offering Section 125 plans, and that Massachusetts employers were less likely than other US firms to terminate coverage or restrict eligibility (Gabel et al. 2008, Gabel, Whitmore, Pickreign 2007). Furthermore, evidence from Massachusetts indicates that despite concerns about potential crowd out from new public options (Cutler and Gruber 1996, Gruber and Simon 2008), there was actually an expansion in private coverage. (© 2010 by Carrie Hoverman Colla, William H. Dow, and Arindrajit Dube.)

Despite incentives to the contrary, employer-based coverage is alive and well in the Bay State. Go figure.


Cutler, D. and J. Gruber (1996). “Does public health insurance crowd-out private insurance?” Quarterly Journal of Economics 111: 391–430.

Gabel, J.R. et al. (2008). “After The Mandates: Massachusetts Employers Continue To Support Health Reform As More Firms Offer Coverage.” Health Affairs 27 (6).

Gabel, J.R., H. Whitmore, J. Pickreign (2007). “Report From Massachusetts: Employers Largely Support Health Care Reform, And Few Signs Of Crowd-Out Appear.” Health Affairs 27(1).

Gruber, J. and K. Simon (2008). “Crowd-out 10 years later: Have recent public insurance expansions crowded out private health insurance?” Journal of Health Economics 27(2):201-217.

Long, S.K. and P.B. Masi (2008). “On the Road to Universal Coverage: Impacts of Reform in Massachusetts at One Year,” Health Affairs 27 (4).

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