The Effect of the Affordable Care Act on Entrepreneurship among Older Adults


One goal of the Affordable Care Act (ACA) was to enable entrepreneurship by increasing access to non-employer-based health insurance. We evaluate the extent to which the ACA was successful at this, providing some of the first estimates of the effect of the main provisions of the ACA on entrepreneurship. We are the first to focus specifically on older adults, whose higher average health costs and health insurance premiums make health insurance more salient to their labor market decisions. We do so using data from the American Community Survey and a difference-in-difference strategy, taking advantage of Medicare-eligibles as a control group less affected by the ACA. We find that the ACA led to a 3–4% increase in self-employment. We find similar increases in the likelihood of being self-employed in an incorporated business and of generating at least $5000 in business income, as well as a 9% increase in the likelihood of being self-employed full time. By lowering the cost of non-employer health insurance policies to older adults, the ACA appears to have eased their transition from employment to self-employment.

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Fig. 1

Source: Calculations from IPUMS American Community Survey data


  1. 1.

    In 2010, 77% of covered non-elderly adults had employer-sponsored coverage (author calculations from the 2010 March CPS).

  2. 2.


  3. 3.

    According to a 2009 report by the White House Council of Economic Advisers, “The proposed reforms could help spur entrepreneurial activity by increasing the incentives for talented Americans to launch their own companies, and could increase the pool of workers willing to work at small firms”

  4. 4.

    See Gruber and Madrian (2004) for a review of some of the issues and frameworks in quantifying the welfare losses associated with job-lock.

  5. 5.

    Author calculations from American Community Survey data.

  6. 6.

    Self-employment rates are reasonably similar across the two age groups (60–64 and 65–69), with the older Medicare-eligible group either having slightly higher or slightly lower entrepreneurship rates depending on the measure used; see Fig. 1.

  7. 7.

    Pure community rating would mean that all individuals in a community pay the same premium, in contrast to individual rating where insurers may charge each individual a unique premium based on their expected health costs. The ACA implemented partial community rating, allowing only a few reasons for premiums to be adjusted, and limiting the maximum amount of the adjustment. For example, with the ACA health status can no longer be directly used to set premiums; age can still be used but can only increase premiums up to 3 times the minimum, when formerly a 64-year-old might pay 5 or 6 times as much as an 18-year-old.

  8. 8.

    The individual mandate, employer mandate, guaranteed issue, and community rating regulations were all scheduled to start January 1, 2014, along with the subsidized exchanges and the Medicaid expansion (although in practice the employer mandate was pushed back and some states expanded Medicaid earlier, and some later or not at all). The fact that so many of the major ACA provisions were implemented simultaneously makes it difficult to assess their separate, individual effects; in this paper, we simply estimate the effect of all 2014 ACA provisions taken together.

  9. 9.

    We would expect the ACA to have positive effects on the modal small business, where the owner invests enough time in the business that they could not easily get health insurance through a second job. We expect little effect for less time-consuming side-projects that would still allow enough time to acquire group insurance through paid employment. We expect a negative effect on the few most serious businesses that plan rapid growth to where the employer mandate (which applies to business that have 50 or more full-time employees) or ACA-driven taxes become larger concerns than the owner’s personal health insurance.

  10. 10.

    Individuals up to age 26 are eligible to remain as dependents on their parents’ health insurance coverage, under the adult dependent coverage mandate, one of the earliest provisions of the ACA to go into effect in September of 2010.

  11. 11.

    We note here that our estimates and inferences are not sensitive to alternate functional forms or level of clustering of the standard errors (discussed later).

  12. 12.

    Except in the last two columns of Table 6, which use data on health insurance that are only available starting in 2008.

  13. 13.

    See Blume-Kohout (2018) for discussion of possible explanations.

  14. 14.

    Specifically, estimates from the extended specifications in Table 2 suggest that the ACA increased self-employment by about 0.6 percentage points. Taking the ratio of this effect to the “first-stage” estimate—the rough increase in access to non-ESI coverage (about 9.4 percentage points, based on the ACS)—yields a ballpark structural parameter of about 0.064. Estimates scaled in this manner should be interpreted with caution as they are necessarily sensitive to small changes in the numerator (reduced-form DD effect) and the denominator (first-stage effect).


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Bailey, J., Dave, D. The Effect of the Affordable Care Act on Entrepreneurship among Older Adults. Eastern Econ J 45, 141–159 (2019).

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  • Health insurance
  • Affordable Care Act
  • Job-lock
  • Self-employment
  • Entrepreneurship
  • Labor supply
  • Public insurance

JEL Classification

  • I1
  • J2