The cost of health insurance and entry into entrepreneurship

Frank Fossen, Mobarak Hossain (), Sankar Mukhopadhyay and Peter Toth
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Mobarak Hossain: Northern Arizona University
Peter Toth: University of Nevada, Reno

Small Business Economics, 2025, vol. 64, issue 2, No 6, 383-405

Abstract: Abstract Unavailable or expensive health insurance may hinder the transition of individuals from paid employment to entrepreneurship, a phenomenon called entrepreneurship lock. The literature argues that the guaranteed availability of health insurance introduced by the Affordable Care Act (ACA) in the USA in 2010 could reduce this barrier to entrepreneurship and thereby increase entrepreneurial activity. In this paper, we investigate to what extent entrepreneurship lock exists due to health insurance costs even when the availability of health insurance is given. We use individual-level data from the Current Population Survey (CPS-ASEC) combined with county-level panel data on health insurance costs in local health insurance exchanges (HIX) introduced by the ACA to estimate county-treatment fixed effects regressions. The results indicate that a hike in the premium of the benchmark HIX plan by 1% decreases the entry rate into self-employment by 0.76%. Men react more strongly to local HIX premiums than women. There is a stronger effect on starting incorporated businesses than on starting unincorporated businesses, which suggests that the additional businesses triggered by lower HIX premiums are of relatively high quality.

Keywords: Health insurance; Premium; Health Insurance Exchanges; Entrepreneurship (search for similar items in EconPapers)
JEL-codes: H31 H55 I11 I13 J22 J23 L26 (search for similar items in EconPapers)
Date: 2025
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Working Paper: The Cost of Health Insurance and Entry into Entrepreneurship (2021)
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DOI: 10.1007/s11187-024-00927-x

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