The Supreme Court recently ruled on The Affordable Care Act (ACA), a.k.a. “Obamacare,” and that got me thinking about how our health care system affects business startups. Ideally, we would like to see government policies that facilitate and encourage entrepreneurship. Most recent discussion centers on whether the ACA mandate results in a “tax” or a “penalty,” but I think that entirely misses what is important to a person working his or her heart out to start a business.
I started my company, Telecom Analysis Systems, when I was thirty years old, after seven years at AT&T Bell Laboratories. Fortunately my wife worked at AT&T, and I was insured on her corporate health care plan. On the other hand, my co-founders and I were committed to providing health insurance coverage for each employee we hired. This was not a huge burden at the time, because rates were much lower then. Since those days, health insurance rates have skyrocketed, to the point where, if we were starting our business today, providing employee health coverage might prove difficult or impossible.
Why were we, a fledgling tech company, worried about providing employee health insurance in the first place? Because despite the fact that we were a tiny company, we were competing with the “big boys” for top-notch engineering talent. The big corporations provided health insurance, so we had to provide it, too. I remember thinking it odd that one’s health insurance coverage was tied to one’s job, and that it would be much easier for us to focus on our core business if people’s health coverage was their own private matter, not something to be adjudicated by one’s employer. Imagine my surprise when I learned that, in just about every other industrialized country, health care was a matter handled between people and their government, not employees and their employer. Interesting.
As our company grew, and health insurance costs continued to rise, the situation grew more complex and time consuming. Eventually, we had to consider renegotiating our health insurance plan every year, because the insurance carrier we had chosen would raise their rates, sometimes exorbitantly, and we would be forced to seek a new provider. The process consumed much management time and energy, resources that could be better spent developing and selling our products. Also, as a small company (a small “group” in insurance parlance), our rates were higher than those paid by the large corporations, even though our employees were on average younger and arguably healthier. That always seemed unfair to me.
Given our experience, the insurance exchanges called for by “Obamacare” seem to hold some promise for a small, startup tech company . These exchanges would ostensibly create large pools of insured persons that would lead to lower rates for individuals and small businesses. I’m certainly no expert on the matter, but on the surface, that sounds like a good deal for the aspiring entrepreneur.
Here’s something else that looks like a good deal: lots of high school, community college, and four-year college grads looking for jobs right now. Many of them are potential entrepreneurs, who, as a result of “Obamacare,” are able to remain on their parents’ health plan until the age of twenty-six, rather than being forced to seek coverage in the expensive individual market. A software application developer or digital video producer can ply their trade without being concerned about paying for an expensive health care plan. That frees up considerable resources that they can use to start and build their business, and hopefully eventually employ others. This provision of the Affordable Care Act would seem a potential boon to young entrepreneurs.
Another person seemingly helped by “Obamacare” is the midlife entrepreneur—someone who left the corporate world, voluntarily or not, and seeks to start a business. Before ACA, such people faced huge costs in the individual insurance market. I know that for a fact, because I am one of those people! And heaven help the midlife entrepreneur if they or someone in their family has a preexisting condition. The lack of affordable health care coverage could be the factor that precludes that person from starting a business.
So don’t get me wrong—I still think there’s plenty wrong with our current health care system. And again, don’t get me wrong—as an entrepreneur, I like low taxes almost as much as Grover Norquist does. I just believe in putting first things first, and moving away from our previous terrible health care system should be a first thing.