Significant Placebo Results in Difference-in-Differences Analysis: The Case of the ACA’s Parental Mandate

The Affordable Care Act lets young adults stay on their parents’ insurance. Several recent papers use broad age-time difference-in-differences strategies to argue that this causes significant health insurance and labor effects. Using SIPP and CPS data, I show that difference-in-differences models over “placebo” dates also produce statistically significant “effects” long before ACA implementation, even with conservative standard errors and matching adjustments. This suggests that the effects attributed to the ACA could instead reflect dynamics in the age-structure of the health insurance and labor markets. Reducing the age bandwidth yields more reliable estimates of the increases in parental and overall insurance coverage. The key problem in this literature is therefore potentially overstating the “effects” of the ACA in other dimensions. (JEL I13, I18, J08)