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

40 Pages Posted: 12 Jul 2007

See all articles by Gulcin Gumus

Gulcin Gumus

Florida International University (FIU); IZA Institute of Labor Economics

Tracy Regan

University of Miami - School of Business Administration - Department of Economics

Date Written: June 2007

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.

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

JEL Classification: J32, J48, I11

Suggested Citation

Gumus, Gulcin and Regan, Tracy, Tax Incentives as a Solution to the Uninsured: Evidence from the Self-Employed (June 2007). IZA Discussion Paper No. 2866. Available at SSRN: https://ssrn.com/abstract=999336

Gulcin Gumus

Florida International University (FIU) ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Tracy Regan (Contact Author)

University of Miami - School of Business Administration - Department of Economics ( email )

P.O. Box 248126
Coral Gables, FL 33124-6550
United States

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