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Do Small‐Group Health Insurance Regulations Influence Small Business Size?

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  • Kanika Kapur
  • Pinar Karaca‐Mandic
  • Susan M. Gates
  • Brent Fulton

Abstract

The cost of health insurance has been the primary concern of small business owners for several decades. State small group health insurance reforms, implemented in the 1990s, aimed to control the variability of health insurance premiums and to improve access to health insurance. Small group reforms only affected firms within a specific size range, and the definition of the upper size threshold for small firms varied by state and over time. As a result, small group reforms may have affected the size of small firms around the legislative threshold and may also have affected the propensity of small firms to offer health insurance. Previous research has examined the second issue, finding little to no effect of health insurance reforms on the propensity of small firms to offer health insurance. In this paper, we examine the relationship between small group reform and firm size. We use data from a nationally representative repeated cross-section survey of employers and data on state small group health insurance reform. Contrary to the intent of the reform, we find evidence that small firms just below the regulatory threshold that were offering health insurance grew in order to bypass reforms.

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File URL: http://hdl.handle.net/10.1111/j.1539-6975.2011.01421.x
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Bibliographic Info

Article provided by The American Risk and Insurance Association in its journal The Journal of Risk and Insurance.

Volume (Year): 79 (2012)
Issue (Month): 1 (03)
Pages: 231-260

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Handle: RePEc:bla:jrinsu:v:79:y:2012:i:1:p:231-260

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  1. David M. Cutler & Brigitte C. Madrian, 1998. "Labor Market Responses to Rising Health Insurance Costs: Evidence on Hours Worked," RAND Journal of Economics, The RAND Corporation, vol. 29(3), pages 509-530, Autumn.
  2. David Cutler, 1994. "Market Failure in Small Group Health Insurance," NBER Working Papers 4879, National Bureau of Economic Research, Inc.
  3. Robert Kaestner & Kosali Ilayperuma Simon, 2002. "Labor market consequences of state health insurance regulation," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 56(1), pages 136-159, October.
  4. David Card & Dean Hyslop, 1995. "Does Inflation 'Grease the Wheels of the Labor Market'?," Working Papers 735, Princeton University, Department of Economics, Industrial Relations Section..
  5. Kanika Kapur, 2003. "Labor Market Implications of State Small Group Health Insurance Reform," Public Finance Review, , vol. 31(6), pages 571-600, November.
  6. Andrea Borgarello & Pietro Garibaldi & Lia Pacelli, 2003. "Employment Protection Legislation and the Size of Firms," LABORatorio R. Revelli Working Papers Series 23, LABORatorio R. Revelli, Centre for Employment Studies.
  7. David M. Cutler, 1994. "A Guide to Health Care Reform," Journal of Economic Perspectives, American Economic Association, vol. 8(3), pages 13-29, Summer.
  8. Thomas Buchmueller & John Dinardo, 2002. "Did Community Rating Induce an Adverse Selection Death Spiral? Evidence from New York, Pennsylvania, and Connecticut," American Economic Review, American Economic Association, vol. 92(1), pages 280-294, March.
  9. Verick, Sher, 2004. "Threshold Effects of Dismissal Protection Legislation in Germany," IZA Discussion Papers 991, Institute for the Study of Labor (IZA).
  10. Kanika Kapur, 2004. "The Impact of the Health Insurance Market on Small Firm Employment," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 71(1), pages 63-90.
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