Who bears the burden of the U.S. health reform? An Event Study Incidence Analysis

On March 23, 2010, President Obama signed the Patient Protection and Affordable Care Act (ACA) into law. The ACA includes a wide-reaching set of reforms to ensure more universal and comprehensive health insurance benefits. The bill has the potential to impact U.S. firms across all industries through regulations on employer-sponsored insurance (ESI), which resemble mandated benefits, and general equilibrium effects. We aim to identify how much shareholders across industries and firms will bear the burden of the ACA based on an event study of asset prices. We focus on two key legislative dates: (1) when the ACA was passed by the U.S. House of Representatives and (2) when the U.S. Supreme Court ruled on the constitutionality of the ACA. This unexpected change in asset prices captures the long-run expected impact of the reform for a given firm, including general equilibrium effects. Using a dataset of 321 publicly traded firms from 19 sectors (defined by the 2-digit North American Industry Classification System code), we find that 56% of firms experienced a negative impact on their asset prices when ACA was passed, and that the impact on asset prices was heterogeneous across firms. We find that this heterogeneity in asset price effects is consistent with partial equilibrium effects predicted by theory. In particular, shareholders of firms in sectors with a higher proportion of employees who are uninsured or who have ESI prior to the reform experience a negative impact on their asset prices from the ACA. In contrast, shareholders of firms in sectors with a higher proportion of employees who would qualify for the Medicaid expansion or who would qualify for premium subsidies on the health insurance exchanges experience a positive impact on their asset prices. Collectively, our results suggest that the incidence of the ACA lies partly on shareholders, but that the expansion of coverage through public insurance or publicly-supported insurance markets is incident on taxpayers