A Shot in the Arm: How Job Lock Hurts Entrepreneurs(washingtonmonthly.com)
washingtonmonthly.com
A Shot in the Arm: How Job Lock Hurts Entrepreneurs
http://www.washingtonmonthly.com/features/2009/0905.gruber.html
4 comments
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.
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.
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.
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.
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.
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.)
(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.)
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.
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.
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".
You're right, though. I used the word "the" when I should have used the word "a".
Anecdote != data, however, I will say that my decision to stay in my job is quite tied to the health insurance my family (w 1 child) receives through that job. It is simply too risky and expensive to take a lower paying job that might provide worse health insurance or part time work in order to attempt a startup.
Combining guaranteed-issue with an individual mandate may make the actuarial math work out profitably for a lot of scenarios. It would never happen in a free market--the marginal cost of accepting someone with preexisting conditions already exceeds the marginal revenue--but if each insurance company has to take on enough healthy people for each sick person they can still profit.
No system is perfect. I think there are a lot of pieces of reform that have been proposed that would be an improvement, though.
No system is perfect. I think there are a lot of pieces of reform that have been proposed that would be an improvement, though.
if you decline maternity coverage you have a lot better luck.
As a Canadian I'm left saying, WTF America?
I've had two children in the last 2 1/2 years, wife delivered both via C unscheduled. Total cost directly to me: $0.
As a Canadian I'm left saying, WTF America?
I've had two children in the last 2 1/2 years, wife delivered both via C unscheduled. Total cost directly to me: $0.
You can make the argument that people should plan carefully and achieve strong financial stability before having children. I think that's a dumb argument, but I recognize that I might not win the argument with another entrepreneur.
But it's a red herring. There are any number of issues that can prevent you from getting coverage even if you "decline maternity coverage". A big problem for insurers appears to be "having a female reproductive system". Another problem is "having been admitted to the hospital before".
For the 20somethings here without the life experience to know this, just for what it's worth --- cost of an emergency C section: calamitous.
But it's a red herring. There are any number of issues that can prevent you from getting coverage even if you "decline maternity coverage". A big problem for insurers appears to be "having a female reproductive system". Another problem is "having been admitted to the hospital before".
For the 20somethings here without the life experience to know this, just for what it's worth --- cost of an emergency C section: calamitous.
I just find it very strange what the US puts up with in large part because they don't know any better. (Mind you, that probably extends much further than healthcare and much further than the US, but that's another article!)
There are many, many problems with our system here in Canada. There are many problems with EU systems as well, depending on where you go. The thing is that in 90% of all cases, the better deal on a per person basis is a form of socialized medicine. I just don't get how a large portion of the country seems not to understand this.
There are many, many problems with our system here in Canada. There are many problems with EU systems as well, depending on where you go. The thing is that in 90% of all cases, the better deal on a per person basis is a form of socialized medicine. I just don't get how a large portion of the country seems not to understand this.
Speaking as a Canadian as well, I don't understand how you can say that there isn't at least some large part of the US system that is "socialized". Look at Medicare spending or even VA hospitals. You would think that they would first want to fix what they should be doing right in the first place before trying to "fix" even parts of the system that aren't broken (they spend almost as much as Canadians do on a per capita basis on public healthcare on Medicare).
As for these problems you speak of. As an example I just tried to book a physical - the earliest possible appointment? March 10th! Another friend of mine needed to book an initial consult with another medical specialist and their first appointment is almost 17 months away. Sorry, I don't get how such a large percentage of Canadians seem not to understand how poorly our system works and how much better it could and how they are so ideologically opposed to the idea of at least having private options. It's not the rich who are inconvenienced since they just go down to the US and pay, but it's the middle class who are legally prevented from using private providers in Canada so we're stuck to wait.
As for these problems you speak of. As an example I just tried to book a physical - the earliest possible appointment? March 10th! Another friend of mine needed to book an initial consult with another medical specialist and their first appointment is almost 17 months away. Sorry, I don't get how such a large percentage of Canadians seem not to understand how poorly our system works and how much better it could and how they are so ideologically opposed to the idea of at least having private options. It's not the rich who are inconvenienced since they just go down to the US and pay, but it's the middle class who are legally prevented from using private providers in Canada so we're stuck to wait.
If your next physical time is in March you need to find a new doctor my friend!
And for the record I both acknowledge the issues in the Canadian system and support exploring ways the private sector can help improve them. But I agree, there is a lot of ideological resistance to private services, particularly because of the example the US sets.
And for the record I both acknowledge the issues in the Canadian system and support exploring ways the private sector can help improve them. But I agree, there is a lot of ideological resistance to private services, particularly because of the example the US sets.
because of the example the US sets
If only that were the case. Why would we ignore the example set everywhere else in the world where there exists private services? Even France has a greater level of private services than Canada.
Incidentally, the US "example" as being free market or private market based is simply demagoguery particularly when you look at how regulations drastically distort the system (ie tax benefits exclusive to employers and the non-portability of most health insurance). Further, again, the issue with the amount spent per capita on public healthcare in the US is very much similar to Canada - so I'm not sure what example you think that the US sets as it could also be one of government influence and the disastrous effects of statist bureaucracy.
Unfortunately it would be futile to find another family doctor as we have a severe shortage of family doctors in the area. It's so severe in fact that any specialists are forced to spend at least some of their time in part as family doctors and still if you're new to the area you won't be able to find a family doctor. Fortunately, I have no pressing issues so I'm keeping the March appointment - it is still however remarkable and laughable that such a situation exists for such a basic level of care while we have the audacity to try touting how great our healthcare system is to the rest of the world.
If only that were the case. Why would we ignore the example set everywhere else in the world where there exists private services? Even France has a greater level of private services than Canada.
Incidentally, the US "example" as being free market or private market based is simply demagoguery particularly when you look at how regulations drastically distort the system (ie tax benefits exclusive to employers and the non-portability of most health insurance). Further, again, the issue with the amount spent per capita on public healthcare in the US is very much similar to Canada - so I'm not sure what example you think that the US sets as it could also be one of government influence and the disastrous effects of statist bureaucracy.
Unfortunately it would be futile to find another family doctor as we have a severe shortage of family doctors in the area. It's so severe in fact that any specialists are forced to spend at least some of their time in part as family doctors and still if you're new to the area you won't be able to find a family doctor. Fortunately, I have no pressing issues so I'm keeping the March appointment - it is still however remarkable and laughable that such a situation exists for such a basic level of care while we have the audacity to try touting how great our healthcare system is to the rest of the world.
It seems you are trying to argue the case that health insurance is not "insurance" in the way other instruments are. I think we all get that. There are certainly better words, but that's the word commonly used and I think most people can context switch between "insurance" for theft of your Van Gogh and "insurance" for pregnancy.
I had a good conversation with my closest friend, an obstetrician, a month ago. After lots of discussion on what may happen with health care reform, he told me he thought most everyone would be best served if there were no institutions around any aspect of health care and every aspect was pay-out-of-your-pocket as it once was. He may be right, but you can't put the genie back in the bottle. The "country doctor" is a great metaphor for what was and what maybe should be, but there are numerous reason why we can't go back.
Like it or not, society pays for lots of things that are not evenly shared: the roads you drive on, the schools you attend, the court systems that protect people that wind up in law suits, the meat inspectors that are paid by government funds when clearly some people don't eat meat. The list goes on. This is not the root of the problem. Public compromise is part of the grand beauty of living in a diverse ecosystem.
I agree health care is far too complex and there should be more simple and competitive options. All I can say is if you want that, you probably need to spend more time being a part of ensuring for a larger pool of honest people that work in government. What we will get out of this new health care bill (if it does pass) will look like your typical big piece of congressional sausage. Your tired of congressional sausage? All I can recommend is to spend more effort getting honest brokers into Congress.
I had a good conversation with my closest friend, an obstetrician, a month ago. After lots of discussion on what may happen with health care reform, he told me he thought most everyone would be best served if there were no institutions around any aspect of health care and every aspect was pay-out-of-your-pocket as it once was. He may be right, but you can't put the genie back in the bottle. The "country doctor" is a great metaphor for what was and what maybe should be, but there are numerous reason why we can't go back.
Like it or not, society pays for lots of things that are not evenly shared: the roads you drive on, the schools you attend, the court systems that protect people that wind up in law suits, the meat inspectors that are paid by government funds when clearly some people don't eat meat. The list goes on. This is not the root of the problem. Public compromise is part of the grand beauty of living in a diverse ecosystem.
I agree health care is far too complex and there should be more simple and competitive options. All I can say is if you want that, you probably need to spend more time being a part of ensuring for a larger pool of honest people that work in government. What we will get out of this new health care bill (if it does pass) will look like your typical big piece of congressional sausage. Your tired of congressional sausage? All I can recommend is to spend more effort getting honest brokers into Congress.
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.
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.
If you employ someone you should really consider a form of group insurance, as both theirs and your rates would be cheaper.
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?
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."
"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."
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.
"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.
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.
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.
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.
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.
If it was $1200 a month with guaranteed-issue, that would at least be something a family could budget for. But it's not, right now. It's $1200 except your wife can't get coverage at all despite no major medical problems, or your daughter is excluded from virtually all care because of a hospital visit years ago.
Financially-savvy young entrepreneurs with families would obviously be better off with high-deductable plans and HSAs, which cost significantly less than $1200/year. But again, they can't do that, because private health insurance isn't guaranteed-issue.
Financially-savvy young entrepreneurs with families would obviously be better off with high-deductable plans and HSAs, which cost significantly less than $1200/year. But again, they can't do that, because private health insurance isn't guaranteed-issue.
Curious, could you please share how you are covered and the cost? COBRA, Freelancer's Union, something else?
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.
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.
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.
I have a high-deductible plan from Assurant, with prices roughly equal to what they quote here (low $100s): http://www.assuranthealth.com/corp/ah/healthplans/individual...
Mandated insurance with guaranteed-issue is a tax on the young and healthy to subsidize the old and sick. My plan, for example, is illegal in NY and NJ which have strong community rating requirements.
You can certainly think that taxing single 20somethings to subsidize families and the elderly is a good decision as a matter of policy, but it's not going to do a whole lot to increase entrepreneurship.
Mandated insurance with guaranteed-issue is a tax on the young and healthy to subsidize the old and sick. My plan, for example, is illegal in NY and NJ which have strong community rating requirements.
You can certainly think that taxing single 20somethings to subsidize families and the elderly is a good decision as a matter of policy, but it's not going to do a whole lot to increase entrepreneurship.
What mandatory insurance scheme is not a tax on the fortunate to subsidize the unfortunate?
Without a mandate, how do you provide any reasonable coverage to the unfortunate without falling prey to adverse selection?
This argument just doesn't seem well thought out.
Without a mandate, how do you provide any reasonable coverage to the unfortunate without falling prey to adverse selection?
This argument just doesn't seem well thought out.
What mandatory insurance scheme is not a tax on the fortunate to subsidize the unfortunate?
If you make healthy people buy fairly priced catastrophic coverage so that if they have an accident they don't declare bankruptcy and stick the rest of us with the bill, that's not a subsidy. It becomes a subsidy when you force them to pay the same rates as less healthy people, or force them to buy comprehensive policies that go beyond the coverage that they actually need.
If you make healthy people buy fairly priced catastrophic coverage so that if they have an accident they don't declare bankruptcy and stick the rest of us with the bill, that's not a subsidy. It becomes a subsidy when you force them to pay the same rates as less healthy people, or force them to buy comprehensive policies that go beyond the coverage that they actually need.
I can't agree more. If we must discuss things at the heartless, what's-in-it-for-us level: Just because you may get sick doesn't mean you'd be a bad entrepreneur. One of the best mobile programmers I know has gout, and it's pretty difficult for him to get coverage.
yep, the "revoked arbitrarily" aspect seems to not be well understood by most.
"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."
I think people have missed this point. It's not as if there's a single-payer proposal working its way through Congress, although I think there ought to be. Health insurance sucks; even people who have it are often reluctant to visit the doctor in case it impacts its future coverage although this may result in a loss of economic productivity. A single-payer system will not deliver the desired results to everyone all of the time, but at least it won't treat people as if past illness were somehow a breach of contract.
Certainly, singe-payer means everyone paying a bit more tax to subsidize the least healthy, and if taxes are high enough the risk-/reward ratio of individual private enterprise becomes uneconomic. But if the required tax increases are modest, the benefits for job mobility and general financial security (vs medically-related bankruptcy) will more than outweigh the cost.
Right now an individual's medical problem all too often becomes a financial and legal problem as well. It seems to me that decisions with legal and financial aspects which must be taken in order to obtain medical treatment are made under duress. I had to have emergency medical attention last year and I really wonder about the enforceability of contracts I signed while puking and under the influence of morphine. And I had a good experience overall (no complications, not huge unexpected bills, quick recovery). Given how Kafkaesque the situation is for a good outcome, I shudder to think what it must be like for someone with a deadly or chronic condition.
I think people have missed this point. It's not as if there's a single-payer proposal working its way through Congress, although I think there ought to be. Health insurance sucks; even people who have it are often reluctant to visit the doctor in case it impacts its future coverage although this may result in a loss of economic productivity. A single-payer system will not deliver the desired results to everyone all of the time, but at least it won't treat people as if past illness were somehow a breach of contract.
Certainly, singe-payer means everyone paying a bit more tax to subsidize the least healthy, and if taxes are high enough the risk-/reward ratio of individual private enterprise becomes uneconomic. But if the required tax increases are modest, the benefits for job mobility and general financial security (vs medically-related bankruptcy) will more than outweigh the cost.
Right now an individual's medical problem all too often becomes a financial and legal problem as well. It seems to me that decisions with legal and financial aspects which must be taken in order to obtain medical treatment are made under duress. I had to have emergency medical attention last year and I really wonder about the enforceability of contracts I signed while puking and under the influence of morphine. And I had a good experience overall (no complications, not huge unexpected bills, quick recovery). Given how Kafkaesque the situation is for a good outcome, I shudder to think what it must be like for someone with a deadly or chronic condition.
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.