Is Employer-Based Health Insurance a Barrier toEntrepreneurship?

The focus on employer-provided health insurance in the United States may restrict businesscreation. We address the limited research on the topic of “entrepreneurship lock” by usingrecent panel data from matched Current Population Surveys. We use difference-indifferencemodels to estimate the interaction between having a spouse with employer-based healthinsurance and potential demand for health care. We find evidence of a larger negative effectof health insurance demand on business creation for those without spousal coverage than forthose with spousal coverage. We also take a new approach in the literature to examine thequestion of whether employer-based health insurance discourages business creation byexploiting the discontinuity created at age 65 through the qualification for Medicare. Using anovel procedure of identifying age in months from matched monthly CPS data, we comparethe probability of business ownership among male workers in the months just before turningage 65 and in the months just after turning age 65. We find that business ownership ratesincrease from just under age 65 to just over age 65, whereas we find no change in businessownership rates from just before to just after for other ages 55-75. We also do not findevidence from the previous literature and additional estimates that other confounding factorssuch as retirement, partial retirement, social security and pension eligibility are responsiblefor the increase in business ownership in the month individuals turn 65. Our estimatesprovide some evidence that “entrepreneurship lock” exists, which raises concerns that thebundling of health insurance and employment may create an inefficient level of businesscreation....