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Obamacare Could Lead to 25,000 New Businesses a Year

The Affordable Care Act is expected to reduce "entrepreneur lock," where a lack of available health coverage prevents aspiring entrepreneurs from leaving their jobs to strike out on their own.
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While the impact of the Affordable Care Act on businesses is hotly debated, it appears that the health care law is providing the unexpected benefit of reducing the number of people who are unable to leave their jobs to start new businesses, National Public Radio reported.

The traditional system of employer-provided health care in the U.S. may prevent people from leaving the their jobs to become entrepreneurs because of the difficulty of obtaining health care coverage in the private market--especially for those who have existing health issues. The problem is often referred to as "entrepreneur lock." 

"Entrepreneur lock has proven to be a significant barrier to potential entrepreneurs," Dane Stangler, vice president of research and policy at the Kauffman Foundation, told NPR.

Under the Affordable Care Act, it is much easier for these potential entrepreneurs to get coverage after leaving their jobs, NPR reports. "To the extent that the Affordable Care Act unlocks that job lock--that entrepreneur lock--one effect is to provide a boost to entrepreneurship overall," Stangler said.

In fact, Craig Garthwaite, professor of management and strategy at the Kellogg School of Management, estimated that implementation of the act could lead 500,000 to 900,000 people to leave the labor market. Additionally, Stangler estimated that the Affordable Care Act could create roughly 25,000 new businesses per year. He added, however, that if the government limits the number of inexpensive catastrophic policies, they could become too expensive for some entrepreneurs, NPR reported.

 




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