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Do small group health insurance regulations influence small business size?

Author

Listed:
  • 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.

Suggested Citation

  • Kanika Kapur & Pinar Karaca-Mandic & Susan M. Gates & Brent Fulton, 2006. "Do small group health insurance regulations influence small business size?," Working Papers 200622, School of Economics, University College Dublin.
  • Handle: RePEc:ucn:wpaper:200622
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    File URL: http://hdl.handle.net/10197/291
    File Function: First version, 2006
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    References listed on IDEAS

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    1. Kanika Kapur, 2003. "Labor Market Implications of State Small Group Health Insurance Reform," Public Finance Review, , vol. 31(6), pages 571-600, November.
    2. Alan C. Monheit & Jessica Primoff Vistnes, 1999. "Health Insurance Availability at the Workplace: How Important are Worker Preferences?," Journal of Human Resources, University of Wisconsin Press, vol. 34(4), pages 770-785.
    3. 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.
    4. David M. Cutler, 1994. "A Guide to Health Care Reform," Journal of Economic Perspectives, American Economic Association, vol. 8(3), pages 13-29, Summer.
    5. Pietro Garibaldi & Lia Pacelli & Andrea Borgarello, 2004. "Employment Protection Legislation and the Size of Firms," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 63(1), pages 33-68, April.
    6. Verick, Sher, 2004. "Threshold Effects of Dismissal Protection Legislation in Germany," IZA Discussion Papers 991, Institute for the Study of Labor (IZA).
    7. David Card & Dean Hyslop, 1997. "Does Inflation "Grease the Wheels of the Labor Market"?," NBER Chapters,in: Reducing Inflation: Motivation and Strategy, pages 71-122 National Bureau of Economic Research, Inc.
    8. Robert Kaestner & Kosali Ilayperuma Simon, 2002. "Labor Market Consequences of State Health Insurance Regulation," ILR Review, Cornell University, ILR School, vol. 56(1), pages 136-159, October.
    9. David Cutler, 1994. "Market Failure in Small Group Health Insurance," NBER Working Papers 4879, National Bureau of Economic Research, Inc.
    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.
    11. 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.
    12. Monheit, Alan C. & Steinberg Schone, Barbara, 2004. "How has small group market reform affected employee health insurance coverage?," Journal of Public Economics, Elsevier, vol. 88(1-2), pages 237-254, January.
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    Cited by:

    1. repec:ebl:ecbull:eb-17-00260 is not listed on IDEAS
    2. C. J. Krizan & Adela Luque & Alice Zawacki, 2014. "The Effect Of Employer Health Insurance Offering On The Growth And Survival Of Small Business Prior To The Affordable Care Act," Working Papers 14-22, Center for Economic Studies, U.S. Census Bureau.

    More about this item

    Keywords

    Health insurance; Small business; Insurance; Health--Law and legislation; Small business--Growth;

    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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