Did the ACA reduce job-lock and spur entrepreneurship?

Abstract

Purpose The purpose of this paper is to assess the effect of the recent Affordable Care Act’s (ACA) Dependent Mandate (DM) that requires health insurers to extend dependent coverage to the children of their insured, up to age 26. The DM has the potential to free young persons from “job lock,” enabling them to engage in entrepreneurial activity. Using the American Community Survey, the authors analyze the change in self-employment for ages 18-25 relative to the implementation of the DM. Design/methodology/approach The authors approach the research question in a unique manner and in doing so, extend the literature. Employing national data, the authors focus on young adults impacted by the DM (those under the age of 26 may remain on their parents’ insurance). While the DM is a condition of the ACA, prior to its implementation several states had already passed their own such provision. The authors exploit this state-by-state variation in the methodology. Findings The authors find no evidence that the ACA has stimulated self-employment among all young adults. However, the authors determine that the DM has a positive and significant effect on the likelihood of students being self-employed. The result is even more pronounced when using a stricter definition of entrepreneurship, an incorporated business. Sub-group analyses show no evidence of a significant effect on entrepreneurship among young adults in other groups. The results remain after conducting various falsification tests. Originality/value The paper empirically addresses the commonly held belief that the ACA is creating new businesses via reduced job lock. Policy makers may wish to target other explanations of job lock rather than health insurance availability.

Entrepreneurship Lock and the Demand for Health Insurance: Evidence from the US Affordable Care Act

“…The ACA's dependent coverage mandate, implemented in 2010, required insurance plans to cover enrollees' adult children through December 31 of the year their child turned 26. Previous studies observe little to no impact of that earlier provision on young adults' probability of selfemployment, though the mandate did contribute to parental job lock (Bailey 2017;Condliffe, Saboe, and Terrizzi 2017;Bae and Meckel 2022;Kim 2022).…”