SPEA UNDERGRADUATE HONORS THESIS Projecting the Effect of the Excise Tax on High Cost Employer- Sponsored Health Coverage on Health Care Consumption

This paper estimates the impact of what has come to be referred as the "Cadillac tax" provision of the Patient Protection and Affordable Care Act on health care consumption and the employer offer rate of health insurance in the United States. Because this tax on high cost health plans has yet to be implemented, no data currently exist regarding its effect. Therefore, the datasets used in this paper involve past figures of premium cost distributions, employer offer rates, plan characteristics, and individual-level healthcare data aggregated by the Kaiser Family Foundation's (KFF-HRET) Annual Survey of Employer Health Benefits and the Medical Expenditure Panel Survey Household Component (MEPS-HC). Using this data, I forecast the growth in premiums and the effective increase in price due to the excise tax. Subsequently, I determine the price elasticity of demand of health insurance and use this figure to estimate the change in employer offer rates due to the excise tax. I also employ regression analysis using the MEPS Household Component dataset to calculate the change in health expenditures with respect to a change in the price of premiums. I estimate that in 2018, the employer offer rate will decrease by between .42% and .48% and health care expenditures of individuals with employer-provided insurance will decrease by between .06% and .07%. I estimate that in 2029, the offer rate will decrease by between 1.92% and 2.45% and health care expenditures will decrease by between .33% and .43%.