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

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Author Info
Gulcin Gumus () (Florida International University and IZA)
Tracy L. Regan () (University of Miami)

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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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Publisher 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
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Handle: RePEc:iza:izadps:dp2866

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

Other versions of this item:

Find related papers by JEL classification:
J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Private Pensions
J48 - Labor and Demographic Economics - - Particular Labor Markets - - - Particular Labor Markets; Public Policy
I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

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