
Is Employer-Based Health Insurance A Barrier To Entrepreneurship? (2010) - ScottBurson
http://www.rand.org/pubs/working_papers/WR637-1.html
======
brm
Yes. It's a hindrance to most life paths that don't involve full-time
employment. As someone with a chronic auto-immune condition I'm effectively
tethered to an employer or a spouse if I want health coverage.

Should I choose pursue an art as my vocation or start a company I'd have to be
willing to endure a lag in my insurance until whatever I was pursuing became
successful enough that I was eligible to be covered by a trade group or had
enough revenue to buy health insurance.

Guaranteed, affordable health coverage not tied to an employer or a spouse
would remove a incredible burden from my life.

~~~
mjn
Once the PPACA exchanges phase in next year, will that ameliorate the problems
in your case? They seem like they target this case specifically, essentially
trying to turn each state's population into a large risk pool that anyone can
buy into, rather than having risk pools be employer-tied.

~~~
jjoonathan
You beat me to it! (For those who don't know, the PPACA is sometimes called
"Obamacare" although it should be noted that the name is more a result of
political maneuvering than the result of particularly close affiliation with
Obama.)

I still think we should go all the way to single-payer. Other countries have
had such success with this model that it's becoming very difficult to argue
that it's inherently flawed (rather than the other way around). If the US
health industry had to compete directly with any of these systems, it would go
out of business tomorrow, since they offer similar care (in terms of outcome
rates) at half the price per person. That doesn't even include the effects on
entrepreneurship and employment!

While the ACA did little to fix the "US health care costs twice as much and
doesn't deliver better outcomes" problem, it does have a good shot at fixing
the preexisting condition and individual insurance debacles.

~~~
Daniel_Newby
> Other countries have had such success with this model that it's becoming
> very difficult to argue that it's inherently flawed ...

The British NHS discovered that by not feeding hospitalized patients they
could realize tremendous savings in food, shortened length of hospital stay,
followup costs, etc.

> half the price per person

Health care spending will dramatically increase under Obamacare. Americans
spend a lot on health care _as a lifestyle choice_. Obamacare is nothing more
than an attempt to recreate the housing bubble using health care.

~~~
phaemon
> The British NHS discovered that by not feeding hospitalized patients they
> could realize tremendous savings in food, shortened length of hospital stay,
> followup costs, etc.

That's a lie. Try checking your facts next time:

[http://fullfact.org/factchecks/nhs_malnutrition_death-28806](http://fullfact.org/factchecks/nhs_malnutrition_death-28806)

Oh, and by the way, the NHS costs us less than US public healthcare costs.
Meanwhile, I can get zero deduction, all additions, money for any nights spent
in an NHS hospital, private health insurance for $150 a month. How much does
yours cost?

~~~
Daniel_Newby
The story was covered extensively by bloggers over 5 years ago, and appeared
in the press periodically since. Basically, the local NHS trusts fired a lot
of hospital staff to save money. They replaced them with service contractors.

So instead of a trained nurse feeding helpless patients, a gormless food
deliverer drops a tray off at the patient and leaves. On paper they are still
being fed, but in reality patients were starving during the trickiest few
hours of recovery. But look at the costs drop!

Similar cost cutting was done for the building caretakers and similar staff.
On paper everything is the same just more efficient, but in reality the floors
are not getting cleaned, nobody is bringing round tea for the surgeon in the
middle of a 12 hour procedure. But look at the costs go down! Look at the
readmission rate drop!

~~~
phaemon
Well, yeah, except that the starving patients bit never actually happened.
That's the bit you're missing.

I know that they had some problems with some NHS trusts as they went more
"efficient private sector", mainly with cleanliness, but this was not
pervasive throughout the NHS and suggesting it was commonplace is a flat out
lie.

~~~
Daniel_Newby
Once again, I am not talking about the recent media fight about arguably-
cooked statistics. I'm talking about reports from a variety of sources
starting in about 2007, including nurses and doctors. If it was a
disinformation campaign, it was curiously extensive for not having been used
in a media campaign of the day.

~~~
phaemon
Links, fact and numbers. Not "I heard it on the Internet so it must be true".
If you're going to accuse the nurses and doctors who work in the NHS of
_criminal negligence_ , you ought to have the decency to at least check your
facts!

And you never got around to answering my question: is your private insurance
cost competitive with UK private insurance?

------
pixelmonkey
+1 this research being done. When I bootstrapped Parse.ly by doing consulting
in 2009/2010, my biggest costs were rent and healthcare. I wrote about this in
my blog post, "Startups: not for the faint of heart".
[http://www.pixelmonkey.org/2011/04/02/not-for-the-faint-
of-h...](http://www.pixelmonkey.org/2011/04/02/not-for-the-faint-of-heart)

To get a good "sole proprietorship" plan for me cost >$1,100 a month. My
healthcare cost nearly as much as my rent in Astoria, NYC.

I've spoken to many budding entrepreneurs in NYC, and they have told tell that
the loss of an employer-provided healthcare plan is a major factor that stops
people from quitting their jobs to start a company.

~~~
mgkimsal
was this just for yourself, or a family? $1100 seems steep - a 'high
deductible' HSA plan for a single person should be < $500/month - it's
currently < $350 for two of us.

~~~
mjn
When I was looking (a few years ago, in California) I had trouble finding HSA
plans that included prescription-drug coverage (even with a very high
deductible) for less than ~$400-500/mo. There were plans cheaper than that
with _no_ drug coverage (starting around $200), but that leaves you on the
hook for unlimited liability if you end up needing an expensive prescription
(and some can be very expensive). I was looking for something where I self-
insure the first $10k in an HSA, and then the plan covers
hospitalization+drugs past that. And those exist, but not at the lowest end.

~~~
mgkimsal
It seems it's a bit of a shell game...

$500/month with some prescription coverage is a guaranteed $6k/year.

$200/month without prescription coverage is a guaranteed $2400/year - $3600
savings. If you know you'll have more than $3600/year in prescription costs,
then this plan doesn't necessarily make sense, but unless you know you'll have
that much in costs, it doesn't matter.

 _I was looking for something where I self-insure the first $10k in an HSA,
and then the plan covers hospitalization+drugs past that. And those exist, but
not at the lowest end._

Not sure what you mean. Those are the only HD/HSA plans I see - you self
insure up the first $2k/$5k/$10k, and the insurance plan covers stuff after
that. Most I've seen, deductibles under $10k carry a co-insurance split
between you and the insurer up to a certain amount. In our case, if we just
took the $10k deductible, we'd get everything covered after our initial $10k,
and that is the 'lowest' end (I'm thinking you're meaning cost - maybe you
mean something else?)

~~~
mjn
My worry is coverage of prescription drugs above $10k/yr. I'm perfectly fine
paying for normal prescription drugs, but when I was looking for high-
deductible insurance, all the cheaper plans explicitly said "no prescription
drug coverage", even above the high deductible, which I didn't feel
comfortable with. To me the idea of the high-deductible plans was that I cover
regular costs in return for coverage in the event of a catastrophic illness.
For example, in the unlikely event I'm diagnosed with MS and need a Copaxone
prescription ($40k/yr), I can't self-insure that amount.

~~~
mgkimsal
Maybe mine's different - any medical cost over the deductible is covered -
prescriptions or hospital visit or whatever??

------
tptacek
Anecdotally, when we started hiring for Matasano, availability of health
insurance was the #1 concern we heard from candidates. It even beat salary.
Also: I almost didn't get to do Matasano, because private health insurance
refused to cover my wife and my daughter.

~~~
digikata
Yup, changing jobs recently, trying to calculate pricing/coverage comparisons
between health benefits took up more time than all the other
negotiation/salary/vacation/etc aspects of the offer.

------
sitkack
Yes, and duh. Corp provided health insurance means the employer controls the
labor liquidity, not the employees. The hypocrite Republicans _should_ have
loved to offload the cost of health insurance onto the taxpayer, not the corp.
But the power of employee control even trumps direct bottom line profits.

Wal-Mart gets it, that is why it encourages employees to seek public
assistance and pays them so little that they still qualify.

------
Matti
Looking at the Nordic countries you might possibly make the counterpoint that
publicly funded health care implies a taxation model that makes it
economically unrewarding to become an entrepreneur.

~~~
nawitus
At least in Finland entrepreneurs are taxed less than many full-time
employees. Corporations are taxed at a flat percentage (about 28% of the
profits), while income taxes are progressive and up to 50%. In fact, your
argument doesn't make much sense.

High taxation doesn't logically imply that it's necessarily unrewarding to
become an entrepreneur but rewarding to be a full-time employe. You can have
high taxes for entrepreneurs and low taxes for employees, or high taxes for
both, of low taxes for both, or high taxes for employees and low taxes for
entrepreuners.

A lot of high-earning individuals are actually using the lower tax rate of
corporations to lower their tax rate. If you look at a graph of tax rate
versus income, it slowly increases, but after about 60k/year it becomes
possible to lower the tax rate using tax palnning.

1\. [http://liljat.fi/2011/04/isojen-puolueiden-aanet-menevat-
kan...](http://liljat.fi/2011/04/isojen-puolueiden-aanet-menevat-kankkulan-
kaivoon/kuva1/)

~~~
enra

      > At least in Finland entrepreneurs are taxed less than many full-time employees.
    

It is true in high income levels that you can gain with tax planning, but I
wouldn't say many are taxed less. Actually taxes/costs are pretty hurting for
many starting entrepreneurs or small businesses.

If entrepreneur wants money out of the company (like for rent), she pays the
taxes twice. Once as a corporation (28%) and then again as capital gains tax
and/or as an income tax (+ all the costs that comes with employing yourself).
Rule thumb for starting entrepreneurs that you need to make at least twice the
money you want to make as an individual since taxes and costs the other half.

This is more of a case that wealthy individuals have more options and
sometimes they use them and not about entrepreneurship. If you don't have a
high income, you're probably paying more taxes(+costs) as entrepreneur than as
an employee.

~~~
nawitus
>If entrepreneur wants money out of the company (like for rent), she pays the
taxes twice. Once as a corporation (28%) and then again as capital gains tax
and/or as an income tax (+ all the costs that comes with employing yourself).
Rule thumb for starting entrepreneurs that you need to make at least twice the
money you want to make as an individual since taxes and costs the other half.

An entrepreuner may be taxed the same way for his/her work as an employee is
if he/she wants to. If he pays the income tax, I think that can be reduced
from the corporation's profit tax just like any other corporation. There's
also tax free possibilities up to 60 000€.

------
incision
Yes, I'd say it's a huge one, particularly if you have or are planning to
start/extend a family. I'd be overjoyed my coverage as a "self-employed"
contractor were nearly as straightforward and affordable as it was in my FTE
days.

------
bit_genesis
This had a huge mindshare for me when deciding who to approach as a co-
founder. While I'm younger and incredibly healthy, my ideal co-founder is 9
years older than me and spent much of his 20s as a semi-professional athlete.
It's catching up to him now. After I approached him, I brought up healthcare
and that I knew it would be important to him and that we'd figure that out
together somehow. We were both disappointed at how little healthcare reform
shelters entrepreneurs. In the end, languishing at someone else's company, but
insured, is not the way he wanted to spend his life. If he had a family, that
might have been a harder decision to make.

------
smokey_the_bear
I recently set up group health insurance for my five person company. Before
then we'd all been on individual plans. I felt really awkward making medical
decisions for our employees. The HSA high deductible plan was the best option
for my husband (co-founder) and myself, but I didn't know if anyone had any
medical issues, or when they intended to start families.

Also, we founded our company five years ago, and it was just the two of us for
years. One of the things that kept us in California was that we had selected
Kaiser health insurance, and it was unclear if we could get pregnancy coverage
on another plan in another state.

------
microcolonel
You know, we could just stop messing with healthcare providers and insurers,
and let them provide a worthwhile service rather than just a legal one.

Oh, and try to shut down the FDA too, with all their liability fobbing and
bias toward dangerous, old, and addictive treatments.

------
tarikjn
I am from France and moved to the US over five years ago. I have been altering
between working for an employer and taking time off to work on my projects.
Within the first 2 years, I realized how cumbersome it was to switch
healthcare and be covered between jobs, so I signed up for a private
healthcare at once. I chose to have a low general coverage but a good one for
accidents, I pay $20-40 for a doctor visit, nothing for annual dental check
ups. No vision or drugs coverage (what's the point, for expensive drugs, the
same drugs from the same labs are still cheaper in Mexico than a good
insurance copay, and I have 20/20 vision). My insurance has been $90 per month
for the first two years and recently went up to about $110 per month. When
working for an employer, they would sometimes pay some extra cash when denying
their coverage, if they don't, just add their insurance but keep the private
one. My understanding is that the PPACA will make the cost of those single
payer insurances go up a bit.

~~~
j2d3
That's great for you, obviously you have no documented chronic health
conditions that would exclude you entirely from private insurance.
Unfortunately for me, I do, and am considered uninsurable as am individual,
leaving only employer sponsored group coverage as a viable option until next
year.

~~~
mathgladiator
The really crazy thing is how hard it is to not to eventually have a chronic
health condition given the typical american diet.

~~~
tarikjn
I agree, and when making the conscious decision to get a entry-level private
insurance, I made the calculation that what I save on a lower price insurance
I could use to spend more on healthier food, in addition of me being
physically active, and in my 20's, which makes me a lower risk profile and try
to take advantage of it. I also realize that as I get older, I will probably
need to set more aside for health-related coverage.

------
stretchwithme
Yes, if insurance had nothing to do with your employer, the employer would be
easier to leave.

Imagine if your house and car and food were all paid for by your employer. And
with a tax subsidy that makes it seem cheaper to do it that way than pay for
these things on your own. Yes, leaving an employer would be a complicated
choice.

I'm also not convinced employer insurance is the deal people think it is. When
I left my last full time job and continued the insurance using COBRA, it cost
me $400 a month. I think you wind up subsidizing everyone having a baby or
that do have major health problems.

I'm in my late forties and have a high deductible policy that only cost me
$150 a month before Obamacare made it go up to $260. I don't see it as much of
an impediment, even now. People can spend more on coffee.

Granted, if you have poor health or a family, this can cost quite a bit more.
But these things by themselves can often be a greater barrier to
entrepreneurship than the cost of insurance.

~~~
sliverstorm
Employer insurance probably isn't a mega steal, but that's why it's called a
benefit, not compensation. It's very nice to have.

~~~
stretchwithme
eh. its oversold

------
vijucat
The larger the employer, the better the deal they can work out with the
insurance provider for their employees. This is definitely one of the reasons
why jobs with IBM or UBS, say, are more desirable to most folks than the
assured struggle called entrepreneurship.

~~~
digikata
Preferred pricing for large employers, vs small employers, vs individuals
never made sense to me except for private insurers to divide up groups to
maximize profits. If insurers were simply trying to provide best-value, then
every customer should be in the same risk pool and excess administration costs
to create and apply different rules for different groups could be eliminated.
Instead, all the private insurers create many groups with complex rules,
different coverage levels, then have to administer all these slightly
different rule sets. That complexity then has to be dealt with by everybody,
the customer, the health provider, as well as the insurer themselves.

Profits are possibly maximized but value provided to customers and society is
destroyed. I think this is pretty much reflected in the roughly 2x per capita
costs for private healthcare in the US vs costs for universal care in many
other first world nations.

------
stuntmachine
This is absolutely true, and it's nice to see attention being paid to a
problem that the tinfoil hat in me thinks might just still exist by design.

