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The effect of the Affordable Care Act on entrepreneurship among older adults (Bailey & Dave 2019)

Absence of conflict of interest.

Citation

Bailey, J., & Dave, D. (2019). The effect of the Affordable Care Act on entrepreneurship among older adults. Eastern Economic Journal, 45, 141–159.

Highlights

  • The study's objective was to assess the impact of the Affordable Care Act (ACA) on self-employment among older adults. 

  • The authors used a difference-in-difference design to estimate the impacts of ACA’s expansions of non-employer health insurance on entrepreneurship among older adults, using measures of self-employment from the U.S. Census Bureau's American Community Survey (ACS). The statistical model compared self-employment between older adults not yet eligible for Medicare and slightly older Medicare-eligible adults in the years before and after the implementation of ACA in 2014.  

  • The study found significant increases in participation in some self-employment, full-time self-employment, and having an incorporated business for older adults following the implementation of the ACA.  

  • The quality of causal evidence presented in this study is moderate because it is based on a well-implemented nonexperimental design. This means we are somewhat confident that the estimated effects are attributable to the ACA, but other factors might also have contributed. 

Intervention Examined

Affordable Care Act (ACA)

Features of the Intervention

The ACA included provisions that prevented health insurance companies from refusing coverage due to pre-existing conditions, placed a cap on premiums charged to older individuals, provided subsidies to help pay for health insurance premiums, created state health insurance exchanges to help individuals buy health insurance plans, and expanded Medicaid coverage. The major provisions of the ACA went into effect in 2014. 

The ACA reforms to expand access to non-employer health insurance may have changed incentives for self-employment among those individuals interested in starting their own business, but who did not do so out of concern of losing access to health insurance provided through their employer.  

Features of the Study

The authors used a difference-in-difference design to estimate the impacts of ACA’s expansions of health insurance coverage on self-employment among workers 60-69 years of age. The study focuses on older adults because the impact of ACA is likely strongest for this population since average healthcare costs and insurance premiums were higher for them prior to the implementation of ACA. Using data from the American Community Survey (ACS), the authors compared self-employment outcomes among older adults not yet eligible for Medicare (ages 60 to 64) and slightly older adults eligible for Medicare (ages 65 to 69) in the nine years before and three years after the implementation of the ACA's main provisions in 2014. The authors used Medicare-eligible adults as the comparison group since access to health insurance for this group was not tied to employment and therefore less affected by ACA’s expansions of non-employer health insurance.  

The study authors did not provide descriptive statistics for the 2005-2016 analysis period for individuals between the ages of 60-69 used in their analytic sample. However, they provided summary statistics for individuals between the ages of 60-64 and 65-69 between 2000 and 2016. The total analytic sample used for the 2005-2016 period was 2,746,149 individuals between the ages of 60-69.  

Variables included the statistical model to estimate impacts included: state, year, race, ethnicity, marital status, number of children, education, age, state employment rates, indicators for before and after the ACA implementation, and indicators for whether the individual was eligible for Medicare. 

Findings

Employment 

  • The study found that the implementation of the main provisions of the ACA led to a 0.68 percentage point increase in self-employment for individuals between the ages 60-64. This represents approximately a 4.3 percent increase in self-employment relative to the mean of 16 percent.  

  • The study found that the main provisions of the ACA increased incorporated self-employment by 0.35 percentage points, approximately a 6.6 percent increase relative to the mean of 5.3 percent. 

  • The study found that the main provisions of the ACA increased full-time self-employment by 0.40 percentage points, representing a 9 percent increase from the baseline mean of 4.5 percent. 

Considerations for Interpreting the Findings

The study period occurs before and after the Great Recession and therefore the results of the study may be influenced by the severe recession and the employment decisions of individuals (even with robust controls included by study authors to account for these effects). Another consideration readers should take into account is the relatively short post-ACA implementation study period (2014-2016) compared to the pre-study period (2005-2014). This may not capture the full effects of the ACA provisions that went into effect in 2014. Finally, the uncertainty around the future of the law during the study period may have influenced some individuals taking part in the individual health insurance marketplace.  

Causal Evidence Rating

The quality of causal evidence presented in this study is moderate because it is based on a well-implemented nonexperimental design. This means we are somewhat confident that the estimated effects are attributable to the ACA, but other factors might also have contributed.  This means we are somewhat confident that the estimated effects are attributable to the ACA, but other factors might also have contributed. 

Reviewed by CLEAR

February 2022