Managing the Workplace

Managing the Workplace (BUSE 33032-01)

Professor Canice Prendergast

Spring 2016

Problem Set 1

Wednesday, April 26, 2016

Prepared By:

George Andriopoulos

We pledge our honor that we have not violated the Honor Code during this assignment.

Question 1

Under the Affordable Care act most Americans are required to have health insurance. If you aren’t covered and you don’t qualify for an exemption, you’ll have to pay a penalty with the tax return. It also has implications for employers as well as for insurance policy reforms. I will split my analysis for the Affordable Care Act (ACA) to the individual mandate, the employers’ mandate and the insurance policy reforms.

* Individual mandate

The individual mandate includes a fine of the larger of $325 or 2% of the income in case a person is uninsured and doesn’t fall within the exemption criteria. A fine of $325 would represent 2% of the income of a person earning $16,250 per year. Thus a person earning above that amount would prefer to avoid the fine and enroll in health insurance plan that cost $325 per year. If the individual already has insurance (provided through work or purchased individually) and it costs more than $325 per year, the person faces very few side effects

If we assume that the individual has no insurance, they will face an income effect where they will pay a fine of $325 if they do not enroll for insurance. Also, the supply of labor will increase as those without insurance will work longer hours to compensate for income that will need to compensate to pay for insurance. In addition, a person who does not have insurance and is low income may not seek additional work (which would increase the labor supply) because subsidies are available and that may provide a disincentive to work.

Overall, in regards with the individual mandate the effect of ACA is unclear and is clearly...