The Affordable Care Act, while creating challenges for some businesses, could benefit a particular group of business people: entrepreneurs.
Before ACA, those considering leaving a job with good health insurance to start a business faced a challenge in purchasing health insurance on the individual market. Costs were high, and those with pre-existing conditions in many cases were excluded. Without a spouse with a job providing health insurance, quitting a day job was difficult if not impossible.
“Men and women with poor family health and no access to a spouse’s health insurance were significantly less likely to give up an employer plan and start a new business than were those with access to insurance through their spouses,” said Robert Fairlie, a RAND economist. “Those with access to a spouse’s health insurance plan are much more likely to become self-employed.”
Self-employment rates also rise when Medicare becomes available to U.S. workers at age 65. There is a large and statistically significant increase in business ownership rates when U.S. workers turn 65 and qualify for universal health care coverage under Medicare.
Fewer New Businesses since Recession
New businesses are important for the economy. About 10 percent of startups take off to create hundreds of jobs. Statistics show that fast-growing businesses account for over 50 percent of all job creation in the United States.
Since the financial crisis hit five years ago, there are 5% fewer new businesses getting started than before the recession. In uncertain economic times, it’s harder for entrepreneurs and investors to take the risk; not a good trend when the country needs more jobs. The engine of job growth, young, fast-growing companies, is still sputtering along at the lowest level in 25 years.
ACA Provides Opportunities for Entrepreneurs
The ACA health exchanges provide a set of opportunities that didn’t previously exist. The ACA could actually help small firms compete for employees, because they could essentially use the exchanges as their health insurance plan. Dane Stangler, vice president of research and policy at the Kauffman Foundation, believes the ACA could help boost employment by creating somewhere around 25,000 additional new businesses each year.