Abstract:
The author examines the impact of the Massachusetts’ health reform law of 2006,
Chapter 58 of the Acts of 2006: An Act Providing Access to Affordable, Quality,
Accountable Health Care, which uses both individual and employer insurance-mandates
on Entrepreneurship in the formation of new organizations. Previous studies have
employed policy analysis and simulation modeling to the impact of theoretical mandatory
health insurance regimes on small business, but the contributions of this study are that it
is the first to explore the impact of a real world health insurance system or policy change
on the entrepreneur and to do so empirically, in real time and within the most natural
economic geography, a single MSA or Labor Market Area. It therefore tests whether a
given social policy facilitates or impedes the formation of new organizations, and
therefore, encourages or discourages employment growth via new organization
formation. The author finds significant and persistent suppression of new organization
formation when controlling for organization size, sector and owner gender, and limited
evidence of geographic displacement of firms across the New Hampshire border. While
theory suggests mandatory insurance should reduce insurance costs and improve worker
productivity, the author finds that the regulation has no significant impact on worker
productivity and limited evidence of increases in insurance costs, and estimates the
expected cost in terms of lost employment, sales to the local economy and tax revenue to
in the majority of cases exceed the benefit.
