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Tax Incentives as a Solution to the Uninsured: Evidence from the Self-Employed

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  • Gumus, Gulcin

    ()
    (Florida Atlantic University)

  • Regan, Tracy L.

    ()
    (University of Miami)

Abstract

Between the years 1996 and 2003, a series of amendments were made to the Tax Reform Act of 1986 (TRA86) that gradually increased the tax credit for health insurance purchases by the self-employed from 25 to 100 percent. We study how these changes in the tax code have influenced the likelihood that a self-employed person has health insurance coverage as the policy holder of the plan. The Current Population Survey (CPS) is used to construct a data set corresponding to 1995-2005. The empirical analysis is performed for prime-age men and women, and accounts for differences in family structure and potential eligibility. The difference-in-difference estimates suggest that the series of tax credits did not provide sufficient incentives for the self-employed to obtain health insurance coverage. Estimates of the price elasticity of demand confirm the limited response to changes in the after-tax health insurance premium. The effect was largest, however, among the single men and women in our sample, suggesting that a 10 percent decrease in the after-tax price increases the likelihood of coverage by 0.68 and 1.02 percentage points, respectively.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2866.

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Length: 40 pages
Date of creation: Jun 2007
Date of revision:
Handle: RePEc:iza:izadps:dp2866

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Keywords: health insurance; self-employment; elasticity; CPS;

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References

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Citations

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Cited by:
  1. Gumus, Gulcin & Regan, Tracy L., 2009. "Self-Employment and the Role of Health Insurance," IZA Discussion Papers 3952, Institute for the Study of Labor (IZA).
  2. Robert W Fairlie & Kanika Kapur & Susan Gates, 2010. "Is Employer-Based Health Insurance a Barrier to Entrepreneurship?," Working Papers 200903, School Of Economics, University College Dublin.
  3. Velamuri, Malathi, 2009. "Taxes, Health Insurance and Women's Self-Employment," MPRA Paper 50474, University Library of Munich, Germany, revised Apr 2012.
  4. Heim, Bradley T. & Lurie, Ithai Z., 2010. "The effect of self-employed health insurance subsidies on self-employment," Journal of Public Economics, Elsevier, vol. 94(11-12), pages 995-1007, December.
  5. Heim, Bradley T. & Lurie, Ithai Z., 2009. "Do increased premium subsidies affect how much health insurance is purchased? Evidence from the self-employed," Journal of Health Economics, Elsevier, vol. 28(6), pages 1197-1210, December.

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