Is employer-based health insurance a barrier to entrepreneurship?

Abstract

The focus on employer-provided health insurance in the United States may restrict business creation. We address the limited research on the topic of "entrepreneurship lock" by using recent panel data from matched Current Population Surveys. We use difference-indifference models to estimate the interaction between having a spouse with employer-based health insurance and potential demand for health care. We find evidence of a larger negative effect of health insurance demand on business creation for those without spousal coverage than for those with spousal coverage. We also take a new approach in the literature to examine the question of whether employer-based health insurance discourages business creation by exploiting the discontinuity created at age 65 through the qualification for Medicare. Using a novel procedure of identifying age in months from matched monthly CPS data, we compare the probability of business ownership among male workers in the months just before turning age 65 and in the months just after turning age 65. We find that business ownership rates increase from just under age 65 to just over age 65, whereas we find no change in business ownership rates from just before to just after for other ages 55-75. We also do not find evidence from the previous literature and additional estimates that other confounding factors such as retirement, partial retirement, social security and pension eligibility are responsible for the increase in business ownership in the month individuals turn 65. Our estimates provide some evidence that "entrepreneurship lock" exists, which raises concerns that the bundling of health insurance and employment may create an inefficient level of business creation.

Necessity or opportunity? Government size, tax policy, corruption, and implications for entrepreneurship

“…The overall economic environment and governmental policies play a crucial role and govern these opposing forces (Fairlie et al, 2011). Opportunity entrepreneurs may spend less and delay investments during high taxation and recessions, while they are also more likely to start a business when tax policy and government size are more conducive; necessity entrepreneurs, on the other hand, are forced out of the labor force and into entrepreneurship because of adverse economic conditions (Shiller, 2017).…”

Economic growth through entrepreneurship: Determinants of self‐employed income across regional economies

“…Prior research has found that individuals lacking health insurance are less likely to be self-employed (Fairlie, Kapur, & Gates, 2011;Gumus & Regan, 2015;Holtz-Eakin, Penrod, & Rosen, 1996;Wellington, 2001). This finding has given support to the job lock hypothesis that posits the loss of employer provided health insurance inhibits potential entrepreneurial employment.…”

The diversity of interest in later-life entrepreneurship: Results from a nationally representative survey of Americans aged 50 to 70

“…Indeed, older self-employed adults are less likely to be part of workplace pension and health insurance programs [13]. These barriers may be too expensive to overcome, as evidenced by the fact that rates of entrepreneurship increase after Americans turn 65, the general eligibility age for joining Medicare, the universal health insurance program for older Americans [75]. Indeed, scholars have called for increased levels of social protections—such as unemployment and “food stamp” (SNAP) benefits for entrepreneurs—to make it easier for potential entrepreneurs of all ages to begin their work [73].…”