In the past, millions of would-be entrepreneurs opted not to start their own small businesses, because doing so meant they would have to give up the health care insurance provided for their families by their current employer.
Such discouragement created what many economists referred to as “job lock,” as the employee feared the risk of losing health care coverage and most often could not afford to independently buy insurance.
However, the full implementation of the Affordable Care Act will alleviate many of those fears and encourage 1.5 million more Americans to start their own businesses, according to an independent study by researchers at the Urban Institute’s Health Policy Center, Georgetown University’s Health Policy Institute and the Robert Wood Johnson Foundation.
“Afraid that they may be denied health insurance coverage because of preexisting conditions, unable to afford the premiums, or lose access to a trusted provider, many workers may decide to stay in their job, even if their skills and talents are not optimally deployed. However, under the Affordable Care Act, access to high-quality, subsidized health insurance coverage will no longer be exclusively tied to employment,” the study concluded. “As a result of the ACA, including guaranteed issue of non-group coverage and the financial assistance available for its purchase, we estimate that the number of self-employed people in the United States will be 1.5 million higher than it would otherwise have been.”
According to the report, the ACA provides tax credits to reduce premium costs for low- and moderate-income individuals and families (up to 400 percent of the federal poverty level) without access to affordable employer-based coverage.
Prior to passage of the ACA, people with family members with preexisting medical conditions were especially hesitant about leaving employer-sponsored health plans, for fear of being rejected by a new insurance carrier. However, the ACA forbids insurance companies from denying coverage based on preexisting conditions.
“Research evidence of pre-reform job lock and empirical research demonstrating a significant increase in self-employment because of significant health care reforms or availability of Medicare benefits, strongly suggests that the level of self-employment in the United States will increase as a consequence of full implementation of the ACA,” the report stated.
The report estimated that the number of self-employed people in Wisconsin will increase by about 34,000 from 256,000 to 290,000 after the ACA is fully implemented.
Jack Ablin, chief investment officer of BMO Private Bank, observed, “One of the most important consequences overlooked by the (Congressional Budget Office) study is that by disentangling health care benefits from the employer-employee relationship, entrepreneurship will flourish. In an economy where risk taking is rewarded, encouraging bright, entrepreneurial-minded large company employees to leave the comforts of their nine-to-five jobs to start businesses is critical to America’s long-term success. As a nation, we have gone a long way to cushioning the entrepreneurial plunge. That’s the reason why America has among the laxest bankruptcy laws. Under the Affordable Care Act, no longer will budding business leaders have to worry about losing health care benefits when striking out on their own. Business startups account for the single highest source of new jobs. Under the Affordable Care Act, we can now tell would-be entrepreneurs, ‘We’ve got you covered.'”
