How many new entrepreneurs will health reform create by getting rid of employment lock?
When it comes to the Affordable Care Act, known informally as Obamacare, small business owners are among the most dubious. At first, the legislation mandated businesses with 50 or more employees provide health insurance, causing anxiety about costs. Then recently the administration moved to delay the change until 2015, sowing uncretainty and creating lingering doubts about the repercussions in the entrepreneurial community.
But according to new research out of the Kellogg School, the changes to our healthcare system may benefit at least one segment of the our community -- aspiring entrepreneurs.
Craig Garthwaite, a professor of management and strategy at the business school, studied changes to Tennessee’s public healthcare system that allowed more people to obtain insurance without going through an employer in order to get a sense of how many people are working just for the health coverage, a situation that’s been dubbed "employment lock." These folks may want to do something besides their current gig but can’t afford to find insurance on the individual market, and so are "locked in" to their current employer.
By looking at how many people dropped out of the labor market when Tennessee made it easier to obtain health insurance, Kellogg Insight reports, Garthwaite was able to make an educated estimate of what might happen due to Obamacare on a national scale.
"Obamacare," aims to put an end to employment lock. By ensuring that anyone can purchase affordable insurance through state-based exchanges, the legislation allows people to change jobs - or even exit the workforce altogether - without giving up health insurance. In addition, the ACA involves a large expansion of Medicaid that will cover everyone whose income is below 138 percent of the poverty line.
So just how many people are likely to choose to leave the labor market after the ACA’s implementation? "We estimate anywhere from 500,000 to 900,000 people, depending on a range of assumptions," says Garthwaite.
Leaving the labor market might sound like a bad thing at first blush, but as Garthwaite explains, the ability to step away from paid employment and not face the spectre of financial ruin should you break a leg or suffer some other serious health mishap, actually has benefits. "There are a lot of productive things for the country you could do that aren’t work. And so we shouldn’t think of this as bad for America in that sense. We should think of it as people now having an option they didn’t use to have," Garthwaite comments.
And among those newly conceivable options is starting a business. Freed of the terror that their family won’t be covered in case of an emergency, how many more people who are currently sitting in a cubicle dreaming of starting their own venture will actually take the plunge? We’ll have to wait and see if Garthwaite’s estimate is correct (and what percentage of his total are would-be entrepreneurs), but whatever the exact number of employees locked in to dead-end jobs for the insurance, it’s worth setting this consideration against the much discussed downsides of the bill when you weigh the impact of reform.
Do you think Obamacare will free a significant number of people to pursue their entrepreneurial ambitions?
JESSICA STILLMAN is a freelance writer based in London with interests in unconventional career paths, generational differences, and the future of work. She has blogged for CBS MoneyWatch, GigaOM, and Brazen Careerist. @EntryLevelRebel