We all know talented people who stay in corporate jobs solely because they fear losing access to health insurance. Many have significant experience and adequate start-up money, but find themselves unsure of how to, or even if they can, bridge the coverage gap between COBRA and Medicare. Preexisting conditions, either their own or a family member’s, keep many would-be entrepreneurs from going out on their own. Is this really what’s best for our economy?
How Did We Get Where We Are?
As evidenced by the theme of this blog, I have great respect for our Founding Fathers and their Age-of-Enlightenment ideal of self-reliance. Part of the American ethos is the goal of pulling yourself up by your bootstraps. But pulling yourself up by your bootstraps is only possible when you are well enough to put forth the effort. Moreover, one cannot reasonably compare the healthcare available in the 18th century to our present system. Even for the gravest of conditions, it may have been prudent to avoid a doctor in colonial American given that germ theory and routine hand washing were more than a century away. In any case, the first health insurance policy wasn’t offered in the U.S. until 1890.
So how did it come about that most Americans obtain health insurance through their employer? World War II Specifically in 1942, the National War Labor Board imposed a wage freeze on employers, but did not include health insurance and other fringe benefits in its freeze. This led many employers to offer health insurance in lieu of wages to retain their best and brightest.
A Level Playing Field for Small Businesses
- 80% of U.S. employees work for a small business
- Employees of small business pay 18% more for premiums on average
While it is difficult to make direct comparisons with other countries primarily because they moved to universal coverage some time ago, entrepreneurship continues to thrive in other industrialized countries such as Ireland despite, or possibly because of, universal coverage.
Current Small Businesses
Small businesses pay a disproportionately larger share of the cost to cover the uninsured through their significantly higher premiums per employee. At the very least, our current system makes it harder for them to provide competitive benefits to their employees. It may even discourage some highly skilled, but insurance-sensitive people from considering an offer from a small business. As the Reuters article below demonstrates, healthcare costs are a real issue for small businesses today. But what about the new businesses that haven’t been started?
Potential Entrepreneurs
New York Times:
“If Bill Gates had to worry about health insurance would he have started Microsoft? Who knows,” said Katherine Swartz, an economist at the Harvard School of Public Health.
The cost and availability of healthcare coverage discourages many would-be entrepreneurs from venturing out on their own. The value that these businesses would have created, but for the current system of coverage, is difficult to estimate. Nonetheless, can we afford such a deterrent to would-be entrepreneurs? Small business is the engine of growth in our economy. How many people are waiting in the wings to forge out on their own if this one issue is addressed? If our system continues to punish the risk takers, don’t we all lose out by having a smaller, weaker economy?
Reuters:
The mom and pop businesses that make up the bulk of America’s employers, key players in scuttling health reform during the Clinton years, say years of crushing costs have them backing major changes this time around.
The National Federation of Independent Business helped derail President Bill Clinton’s effort to overhaul the health insurance system during the 1990s, with a massive direct mail and telephone campaign, and a blitz of lawmaker lobbying.
Now, small companies with an average of 10 workers are bearing the greatest burden of insurance premium increases, which have grown twice as fast as inflation for several years. They’ve started lobbying the presidential candidates early and are pushing for changes to taxes and state laws.
