|This is a continuing series called Apple Pie Economics about the deliberate forces and unhappy accidents that are getting in the way of us living up to our entrepreneurial potential. Right now, we’re talking about the problems. Later, we’ll talk about solutions. Part 1 is Intro to Apple Pie Econ. Part 2 is 7 Reasons We Don’t Have More Entrepreneurs (and jobs).|
We started Apple Pie Economics with the story of Laura, a successful entrepreneur who folded up her successful business and got a job.
The problem is not just the health insurance industry’s practice of denying coverage to people who may really need it – it is the lack of competitive alternatives that is so deadly to entrepreneurship. Scholars have known for years that the lack of affordable, reliable or even available health insurance keeps people chained to their employers. [i] Those shackles, called “job lock,” keep roughly 607,000 people from launching a business.[ii]
In fact, when individual states create avenues for people to get affordable health insurance, the number of entrepreneurs increases. When New Jersey reformed its health insurance laws to create markets for individual insurance and guaranteed policy renewals and limited exclusions for preexisting conditions, entrepreneurial activity soared. [iii]
American entrepreneurs ought to have to do battle with market demand, logistics and competition, but not with America itself. The health insurance marketplace that disqualifies entrepreneurs makes starting a business a life or death decision and that is too much for most people to bear. Hopefully, the health insurance reform will take care of this and it won’t get repealed, only improved.
In the next post, we’ll talk about the suffocating pressures Laura experienced trying to figure out the law.
[i] Buchmueller, T. C., and R. G. Valletta. 1996. “The Effects of Employer-Provided Health Insurance on Worker Mobility.” Industrial and Labor Relations Review 49(3): 439–455.; Cooper, P. F., and A. C. Monheit. 1993. “Does Employment-Related Health Insurance Inhibit Job Mobility?” Inquiry 30(4): 400–416
[ii] Fairlie, Robert W., Department of Economics University of California, Santa Cruz and RAND; Kapur, Kanika School of Economics and Geary Institute University College Dublin and RAND; Gates, Susan, RAND“Is Employer-Based Health Insurance a Barrier to Entrepreneurship?” UCD GEARY INSTITUTE, DISCUSSION PAPER SERIES, June 2009.
[iii] DeCicca, Philip, 2010, “Health Insurance Availability and Entrepreneurship.” W.E. Upjohn Institute for Employment Research, April 2010, 10-67.