The new White House administration and the Republican Congress have signaled that they will seek to repeal the Affordable Care Act. Regardless of what replaces it, this will cause significant turmoil for startups because so many startup employees have gotten their insurance in recent years through the ACA marketplaces.

Lost in much of the standard debate about the ACA has been its impact on startup entrepreneurs who are older than age 26 and working for companies with less than 20 people. Such entrepreneurs are no-longer eligible to be under their parents' insurance but they also don't work for companies that typically have employer-sponsored healthcare.

Hopefully, as part of their healthcare market reform, the Republican Congress and White House will provide an alternative marketplace, such as subsidized catastrophe insurance, for entrepreneurs in this demographic to get some coverage. It is very likely that such coverage will be far worse than most ACA plans, but it would provide some level of a safety blanket.

In addition, entrepreneurs nationwide won't know the true impact until Republicans determine whether they will allow Democratic-leaning (and probably some purple) states to keep their own state-run ACA exchanges if they wish to do so, or if they will force them to scrap those marketplaces as well. If they allow states to keep their marketplaces (the essence of the Susan Collins plan submitted to the Senate) then the impact on American entrepreneurs will be lessened because the startup hubs of California, New York, Washington State, Washington DC, Massachusets, and Illinois, to name only a few, will keep their exchanges in place.

However, if the entire existing exchange market is scrapped, startup leaders, and their employees, will have to deal with significant volatility and find alternatives.

For very small companies, one good option will be to contract out a significant portion of the company's 'employment tasks' - engineering, digital marketing, social media, and the like, to foreign contractors and firms (who obviously don't require US insurance) or to local contractors working for multiple companies as consultants (so their collective income is enough to buy private insurance without burdening any one of their contract employers). The company can then provide a limited, but effective, insurance plan to a very small set of core full-time employees, which will keep costs down significantly.

Published on: Feb 9, 2017