Health Insurance and the Supply of Entrepreneurs: New Evidence from the Affordable Care Act's Dependent Coverage Mandate

Abstract

Abstract Is the difficulty of purchasing health insurance as an individual or small business a major barrier to entrepreneurship in the United States? I answer this question by taking advantage of the natural experiment provided by the Affordable Care Act’s dependent coverage mandate, which allowed many 19-25 year-olds to acquire health insurance independently of their employment. A naive difference-in-difference strategy finds that the dependent coverage mandate led to a substantial increase in self-employment among young adults. However, a closer examination of the proper control group together with placebo tests reveals that the naive estimate is not robust, and that the mandate did not truly increase self-employment. This suggests that lack of health insurance and “entrepreneurship lock” have not been major barriers to self-employment for young adults.