Will Health Care Reform Help Entrepreneurs?

I am always fascinated by watching the reaction of businesses to various issues related to government reform. The media loves to portray most businesses and business people as ruthless, greedy, and generaly anti-government. However, in my experience, things are always more complicated than they seem.

At the risk of starting a debate about big vs. small governement, capitalism vs. socialism, let me say that in my experience, businesses and entrepreneurs in general are largely motivated by a strong sense of “self preservation” and “selfish” motivation. I’m not suggesting this in a judgemental way, I’m just calling it like I see it. Most people are motivated by choices that benefit them, and entreprenuers tend to have a stronger sense of that compass that the average person.

So here’s the question, will Health Care Reform benefit entreprenuers? More specifically, since my company is a small business/high tech startup, will it benefit small businesses and high tech startups like mine?  (Hey, I’m an entrepreneur, I’m mostly motivated by selfishness!)

We have to first start by acknowledging that there is in fact no plan yet. Although the current administration has outline a set of principles that they would like to see guide the plan, they’ve been clear to put Congress in the lead of crafting the actual plan. Based on the fact that there is no concrete plan to discuss, I’ll avoid quibbling over the potential details of the potential reform, and instead zoom out and look at the bigger question of Health Care costs.

I won’t beat around the bush, based on my calculus, Health Care Reform would dramatically benefit my business. I also believe that it would be a net positive for the vast majority of High Tech Startups, especially in the Seattle area. Here’s my reasoning, with a little bit of data to back it up…

  • Health Insurance is a significant portion of the overall expenses of most small businesses. In fact more than 40% of small businesses report that health care costs eat up 10% of their payroll expenses (reference).
  • Many small businesses opt to not provide health care coverage because they simply can not afford it.  Thirteen million Americans, nearly one-third of the uninsured, are employees of firms with less than 100 workers. (reference) The portion of non-elderly Americans who are not covered by employer base health insurance is growing (reference), and much of this growth in uninsured comes from small business. The percentage of small businesses offering coverage dropped from 68% to 59%, while large firms held stable at 99%. (reference)
Not to put too fine a point on this, but this all comes down to the high costs of health care. And things aren’t getting better as costs continue to rise. And as costs rise, small businesses are forced to stop coverage or choose worse coverage in an effort to contain these costs.
  • In a recent national survey of small businesses, 75% reported that they did not offer benefits to their employees, citing high premiums as the reason. (reference)
  • And as is often the case with providing services on a smaller scale, since administrative costs associated with health insurance programs are fixed, smaller businesses pay a larger proportion of their premiums toward non-health related costs (like enrollment, marketing, and collections). (reference)
  • 54 percent of businesses with health coverage now or in the past two years reported choosing coverage with higher out-of-pocket costs in response to premium increases. Meanwhile, 35 percent reported switching to insurance that covers fewer services, and 12 percent dropped coverage entirely. (reference)
But it’s not just the direct costs that impact small businesses. I can’t count the number of times I’ve spoken with entrepreneurs who say they lost a great candidate because some larger company offered better benefits.
  • Forty percent of small businesses said that health costs have had a negative impact on other parts of their business (for example, contributing to high employee turnover or preventing business growth).
    (reference)
As an American and an entreprenuer, I believe passionately that America will do best when it fosters innovation. And as someone who has worked in startup technology companies my entire carreer, I am absolutley convinced that small enterprises offer the best opportunity for innovation and economic growth. Anything that helps small businesses focus on their business and innovation will, in my judgement be a boon for America. For that reason I am very excited about the prospects of massive health care reform in our country.

One Response to “Will Health Care Reform Help Entrepreneurs?”

  1. August 5th, 2009 | 3:11 pm

    [...] This post was Twitted by worldlyjohn [...]

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