Is Employer-Based Health Insurance A Barrier To Entrepreneurship?
Sep 23, 2010
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Nearly three-quarters of all full-time workers in the United States get health insurance from their employers. Concerns have long been voiced that workers with employer-based insurance may be reluctant to leave their jobs to start new businesses because of the high cost of premiums or the possibility of disrupting or losing insurance coverage—a phenomenon referred to as "entrepreneurship lock."
To examine these issues, researchers at the Kauffman-RAND Institute for Entrepreneurship Public Policy (KRI) conducted a study to determine whether the U.S. health insurance system impedes business creation. The study considered whether people with employer-based health insurance are more likely to become self-employed (1) if they have an alternate source of health insurance through a spouse or (2) if they have reached the age of 65 and become eligible for Medicare. Researchers developed two models to examine these possibilities, both using data from the Current Population Survey, which contains representative data on U.S. employment, business ownership, health insurance coverage, and health status.
The following are the study's key findings:
In conclusion, KRI's analyses provide some evidence that entrepreneurship lock exists, which raises concerns that the bundling of health insurance and employment may discourage business creation. The implication of this research is that the availability of affordable health insurance for the self-employed has an important impact on whether individuals are likely to become entrepreneurs.
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