

A Shot in the Arm: How Job Lock Hurts Entrepreneurs - sachinag
http://www.washingtonmonthly.com/features/2009/0905.gruber.html

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tptacek
This seems to me to be self-evident. Before we got (expensive) group health
insurance, we lost a large portion of our most promising candidates over
health insurance concerns.

I say this on HN constantly because it bears repeating: if you want to
understand the problem with the current health insurance system, assume that a
normal family of four cannot get private health care coverage at any
reasonable price, or in some locales _at all_. It doesn't matter how much
extra you pay your employees. There are many reasons, a bunch of which devolve
to "we don't want to cover women with functioning uteruses", why a typical
family cannot get covered outside the group coverage system.

~~~
philwelch
The situation varies from state to state--if you decline maternity coverage
you have a lot better luck. Of course, you also better not have kids (or save
up for them when you do have them!), which is morally/emotionally difficult in
the edge case that you get pregnant.

This approach is also more compatible with the concept of "insurance" to begin
with! I have never seen any sense in paying an insurance company to pay the
doctor for your own routine care--shouldn't it be cheaper to just pay the
doctor yourself? You buy insurance to level out the variance on unpredictable
costs. Having children isn't some type of unpredictable medical emergency we
buy insurance against, it's a voluntary decision with a relatively predictable
cost. There's no sense in buying or selling maternity coverage.

Group coverage is just a way for those of us who don't have kids to subsidize
those of us who do.

I think a mandate for insurance companies to ignore preexisting conditions,
traded off against a mandate to buy health insurance, would be a sensible
tradeoff for all parties. I think allowing competition between states would
provide a better environment. I think there are good reasons for reform. I
don't think maternity coverage needs to exist, I highly doubt it makes
financial sense for insurance to cover routine care, and I don't think
insurance should be bundled with employment.

~~~
tptacek
Pregnancy isn't the only issue, and it wasn't the issue in our case. You'll
forgive me for not getting into more detail here. It is not as simple as "we
don't want to subsidize pregnancy" (I sympathise with that). It's "women of
childbearing age are more expensive to cover for a variety of reasons".

Despite a total lack of chronic medical problems in my family, declining
maternity coverage would not have helped us. So let's lose that red herring.

Do I agree that the government shouldn't have to pay for routine predictable
medical expenses? Of course I do. I understand the concept of insurance (to
avoid catastrophic losses from rare events), and I also understand how totally
distorted our health care system is because of the twisted incentives and lack
of transparency in the private employer-funded health insurance system. I'm
not wishing for the NHS, but I'm also not naive enough to think that one
regulatory tweak (guaranteed issue) is going to solve our problems.

Finally, if you have a problem with the idea that the young, healthy, and
fortunate are subsidizing the old, infirm, and poor, you need to revisit the
entire concept of insurance. People who avoid acquiring insurance in their 20s
--- all of whom will certainly try to get coverage in their late 30s --- are
free-riding.

~~~
jdminhbg
The twentysomething "freeriders" are overwhelmingly the source of startup
founders. If you want to force them to subsidize older people, that's fine,
but it's not going to have the effect of increasing entrepreneurship, which is
ostensibly the point of the article.

~~~
tptacek
Did you read the article, or do you just have strong opinions about health
care? Either way is fine, but the point of the article is that one of the
reasons twentysomethings are a huge fraction of startup founders is that they
aren't locked into jobs by health insurance.

(It is also, by the way, simply not the case that twentysomethings are
overwhelmingly the source of startup founders; what they do seem to be is an
overwhelming source of YC company founders. Go make a list of 10 VCs, read
their portfolios, and go look at the "Management Team" sections on their
websites.)

~~~
jdminhbg
Having re-read the piece, I don't see anywhere that he defines his point as
being that "one of the reasons twentysomethings are a huge fraction of startup
founders is that they aren't locked into jobs by health insurance." I'm sure
from your personal experience you think this is the case, but the author
doesn't assert that it's the case, or try to provide evidence that in
countries with universal coverage there are more older entrepreneurs.

I personally think that health insurance is pretty far back on the list of
reasons older people are less likely to found startups than young people. I'm
willing to be convinced there by some sort of evidence. Regardless, in order
for it to be the case that "[u]niversal health insurance, far from suppressing
entrepreneurship, could be a boon to it," it would have encourage more older
entrepreneurs than it discourages among the young.

~~~
tptacek
_Which brings us back to entrepreneurship. Some of tomorrow’s potential
entrepreneurs are today’s employees at firms that provide health insurance.
They may have powerful new ideas that will build the firms of tomorrow. But if
they leave their current job to work on those ideas they may find themselves
without access to reliable health insurance. If they are very young and
healthy, this may not be a major impediment. But for older entrepreneurs who
have developed ideas through years of working for others, the fear of losing
health insurance when they go out on their own can be a barrier to taking that
leap._

You're right, though. I used the word "the" when I should have used the word
"a".

------
brc
As a citizen of a country with universal health care, I can tell you that
health care didn't even enter my head when I elected to become self employed
and start my own company.

1\. I don't need health insurance if I'm happy to be covered under the public
system. Nobody goes bankrupt from healthcare costs in my country. 2\. Because
of universal coverage, purchasing private healthcare for my family costs about
$200/month, and it's a personal policy, not an employer based policy. 3\. If I
employ someone I don't even have to have a discussion with them about
healthcare. It is assumed they will sort out their own health insurance, the
same as they sort out their own car insurance.

There is no doubt that health insurance has an effect on entrepreneurship and
new company formation when it is one of the highest startup costs, that
needn't even exist. I mean, before I started reading threads like this in HN,
the thought never even entered my head.

~~~
run4yourlives
If you employ someone you should really consider a form of group insurance, as
both theirs and your rates would be cheaper.

~~~
brc
No, I don't think you read my comment correctly. I don't need group insurance
because the rates any employees would be perfectly capable of electing whether
or not to have private cover, and most likely will have an existing policy not
tied to any particular employer. The whole point is disconnecting jobs and
health - there is no logical reason to connect these. I wouldn't expect my job
to pay for my house insurance, why would I expect it to cover my health
insurance?

------
sachinag
Here, actual proof - from an MIT economist - that health care is hurting
entrepreneurship. Money quote:

"Americans who have an alternative source of health insurance, such as a
spouse’s coverage, are much more likely to be self-employed than those who
don’t. Wellington estimates that universal health care would therefore likely
increase the share of workers who are self-employed (currently about 10
percent of the workforce) by another 2 percent or more."

------
jdminhbg
This is only a good point if you assume that the current proposals magically
provide free health care to you when you quit your job.

"Universal coverage" as currently being debated just mandates that you
purchase coverages and penalizes you with a tax if you don't; even with a
"public option" you still have to pay for said option.

If you want to argue that tax-supported single-payer systems give you more
freedom to quit your job and start a startup, fine, but nothing currently
proposed in the US does that.

~~~
dasil003
You obviously have not experienced how bad the situation is. For many people
it is _literally impossible_ to get health care coverage if their job does not
provide it.

The difference between paying $0 and $200/month (especially when the first
option is tax-subsidized) is _trivial_ compared to the current situation where
any "insurance" individuals are graced with being allowed to purchase can be
revoked arbitrarily.

So, please, get your facts straight.

~~~
jdminhbg
I have experienced it, because I quit my job and got my own health coverage to
work as a freelancer.

If you think that $200 a month is what mandated insurance will cost a family
of 4 who aren't Medicaid-poor, I don't know what to tell you.

~~~
aichcon
Curious, could you please share how you are covered and the cost? COBRA,
Freelancer's Union, something else?

~~~
tptacek
Tangent: COBRA is a really bad idea too. First, COBRA is probably more
expensive than health care you acquire yourself, because most employers
acquire highest-common-denominator coverage and hide the expense in payroll
and benefits accounting. Second, COBRA has a ticking time limit on it, which
is exactly what you don't want with health insurance (and why you never want
month-to-month or temporary coverage). You might as well not insure yourself
if any catastrophic event is as likely to bankrupt you with insurance as
without it, which is what happens when something bad happens in the latter
part of your COBRA term.

~~~
LogicHoleFlaw
COBRA is a ticking time bomb. But it does have the nice property that it keeps
your "continuous coverage" which is very important in the face of any pre-
existing conditions. That can be a very big deal.

~~~
tptacek
We had COBRA coverage when we started Matasano. Continuous coverage or not,
insurance company beaurocrats refused coverge for us. I'm not sure what
continuous coverage does for you once you obtain coverage, but in Illinois it
doesn't do a thing to help you get it in the first place.

