In the weeks since the Supreme Court’s decision to uphold the Affordable Care Act (ACA), there’s been a lot written—most of it negative—about how the mandatory coverage provision will affect small businesses. There is a story here, however, that isn’t being widely discussed. The law has the potential to eliminate the “job lock” experienced by Americans who are bound to their employers because they need health care and, thus, may fuel entrepreneurialism.
As any entrepreneur will tell you, it takes a lot of guts to walk away from a job that offers health insurance. If you happen to have a spouse whose job provides coverage or an income that will support purchasing insurance in the individual market—and neither of you has any pre-existing conditions—leaving your job to start a small business might require only a great idea and a lot of hard work. But if you don’t have a spouse whose insurance coverage or income can support this venture, or if you have a pre-existing condition, leaving that job may not be possible. If you have a family, you might even be accused of being downright irresponsible.
This is an issue that I know a little bit about. In the summer of 2003, my husband and I launched our own consulting firm. We both had experience managing people and projects in small businesses, and we knew how to negotiate, solve problems, and implement solutions.
Yet the single most challenging aspect of launching our business was finding, evaluating, and purchasing adequate health insurance coverage. Our family of four had your garden-variety health conditions such as allergies, asthma, high cholesterol, and high blood pressure, and it was nearly impossible to evaluate and compare options, and find a plan that provided adequate coverage at a rate we could “afford.” In fact, the lack of affordability literally sunk our business plan, and in less than six months we knew that one of us would have to go back to an employer-sponsored environment.
But what about the American dream of owning your own business? Jonathan Gruber, the Massachusetts Institute of Technology economist who helped craft health reform in Massachusetts as well as the ACA, believes as many as 25 percent of employed individuals suffer from health care-induced job lock. Gruber maintains they would be happier, more productive, and more likely to move into satisfying careers if this barrier to exit were removed. (http://www.washingtonmonthly.com/features/2009/0905.gruber.html)
If you consider that the majority of Americans—approximately 55 percent—rely on employer-sponsored health care coverage, and up to one-quarter of them stay in their job just to keep coverage, then our nation’s workforce is saddled with a huge number of unhappy and/or underproductive employees. What will the possibilities be for our economically downtrodden state when we eliminate this barrier to entry and give our state’s creative talent one of the key boosts they need to launch themselves toward economic independence?
The ACA requires insurers to offer coverage to anyone who applies, regardless of pre-existing conditions. It also prevents insurers from basing premiums on a person’s health status. Couple these provisions with federal subsidies available to people with incomes up to 400 percent of the federal poverty level ($92,200 for a family of four in 2012) for purchasing insurance through an Exchange, and that American Dream might just seem a little more attainable for those with the entrepreneurial spirit.
Certainly, the ACA is no panacea for removing “golden handcuffs,” and the definition of “affordable care” remains to be seen. Like all public policy initiatives, however, it is a step, and a bold and possibly unrealized one, toward fueling a state’s creative engine. And in our state, that engine needs all the grease it can get.
By Emily Houk