Obamacare Could Boost Entrepreneurship


Here’s what we know about the Affordable Care Act: 32 million Americans who would otherwise be uninsured will now have coverage. What you might not know is that Obamacare could also boost entrepreneurship by decoupling healthcare from employment.

How would that work? Existing research estimates that universal health insurance coverage could increase self-employment by as much as 3.5 percent. The reality is that many would-be risk-takers stay with their employers in large part due to the assurance of health insurance, in what economists refer to as "job lock," or "entrepreneurship lock." But, this pressure to be employed by a larger company is loosening as the Affordable Care Act makes it easier and less expensive to purchase individual coverage. Now, hopeful entrepreneurs can go out on their own in a far more efficient allocation of their skills, without gambling their own health coverage, or that of their family.

In addition, startup founders with a small team and limited resources are exempted from the employer mandate (all employers with under fifty workers are exempt) and with the availability of other options, there is a lesser expectation of coverage on the part of employees. By shifting the real burden from entrepreneurs to employees, some employers might still be incentivized to provide employees with a health savings plan, or even full coverage. In fact, businesses with fewer than 10 employees, and average wages beneath $25,000, can claim a fifty percent tax credit on their contributions if they provide insurance for their workers.

By removing the initial barriers to entrepreneurship, and then providing additional assistance to these high-growth new and young businesses, there is real economic benefit to uncover. Not to mention all the opportunities for VC’s and opportunistic new startup founders who could devise business plans around the new health exchanges.

Even the administration has been talking about a boost for entrepreneurship as a key benefits. According to 2011 data (way down from previous years), there are over 400,000 new employer-firms and an estimated 8 million new non-employer businesses each year in the United States. So, any increase in entrepreneurship could be a substantial boost to the economy and new job creation.

So, now that you’re a newly unemployed entrepreneur, here’s how it works.

So, now that you don’t have to worry about health insurance, this is the right time to start a business.