Health Care ‘Job Lock’ Stifles Entrepreneurship
When I’m pitching my Web site, I’m often asked what my “cash-burn rate” is.
That’s startup speak for: “How long can you keep going until you run out of money?”
But cash burn isn’t my problem. My costs are low: You can run a Web site with laptop, an Internet connection and $6.95 web-hosting account.
The wall I’m facing is my COBRA.
COBRA, the Consolidated Omnibus Budget Reconciliation Act of 1986, is the law that lets you stay in your employer’s health-insurance plan for 18 months after you leave your job, provided you pay the premiums yourself.
It’s not cheap. But it does give you some breathing room between jobs.
But once my 18 months are up, the chances of me finding affordable health insurance for my family on my own are slim, and I may have to punt on my startup and go hunting for a job with benefits.
According to economists, up to 25 percent of workers would move on to other jobs, or strike out on their own, if they didn’t fear losing their health coverage.
Time and time again, we hear that innovation, led by entrepreneurs and small businesses, is going to recreate the U.S. economy so it can thrive in the 21st century. And as behemoths, like General Motors, Chrysler and Ford, totter toward possible extinction, our only hope is that someone is coming along with ideas for new businesses.
But many of those potential entrepreneurs are not going to be given a chance to experiment and innovate if they can’t strike out on their own. They are locked into their current job because of health insurance. Shackling workers to jobs they don’t want hobbles the U.S. economy at a time when it needs to be nimble and quick.
So why do we have our current system? It turns out, our employer-based system is really an accident of history. After World War II, the U.S. economy was overheating, and to keep inflation down, the government imposed wage controls. So to attract employees, businesses started offering health and other benefits. In time, employer-based insurance ended up providing most Americans with their coverage but leaving more than 47 million
Tags: COBRA, entrepreneurship, healthcare
March 23rd, 2009 at 8:38 am
Good information.
For clarification on your point “But once my 18 months are up, the chances of me finding affordable health insurance for my family on my own are slim, and I may have to punt on my startup and go hunting for a job with benefits.” - You should note that in Washingon state (I haven’t researched others) ALL insurance companies have to accept you into their plans if you are transferring in from an end-of-life COBRA plan, regardless of your current/past heath condition. Anyone who’s in this situation should note that this is the ONLY time they have to do this - so make sure you act before your coverage expires, otherwise they don’t have to take you.
March 23rd, 2009 at 9:40 am
David,
I was not aware of this - and will look into it. I had earlier tried to change plans and had been rejected because of pre-existing conditions in the family, but perhaps the end-of-life COBRA provision didn’t apply until we were at the end of the COBRA. Thanks again.
Michael
April 21st, 2010 at 5:34 am
Extremely interesting post thanks for sharing I have added your blog to my bookmarks and will check back.
July 26th, 2010 at 9:01 am
I am having one rough Monday! One the bright side, I can stop worrying about paying for my baby’s delivery. After shopping around, I got a plan from InsuranceFP that covers maternity, even though we’re already 3 month’s pregnant!!!