Since the majority of Americans receive health insurance through their employers, Obamacare mostly benefits the uninsured. But a new study finds that the health law will also help over a million Americans who want to leave their jobs to start businesses, but can’t out of fear of losing their current health coverage.
The report by the Urban Institute concludes that Obamacare will allow 1.5 million more Americans to self-employ. Currently, self-employment can be a gamble, especially for Americans with costly or chronic conditions such as diabetes. That’s because insurance offered on the non-group, individual health insurance market tends to be paltry and selective. Government analyses have shown that as much as 26 percent of these individual plan providers refuse to sell coverage to Americans based on their health status, age, or a pre-existing condition. Plans on the individual market are also pricey due to administrative fees and higher cost-sharing.
Faced with these risks of entering the individual health insurance market, Americans usually choose to forgo self-employment opportunities such as creating a tech start-up, becoming an independent consultant, or contracting services for the government. This is known as “job-lock,” and there’s plenty of evidence to suggest that it’s a serious flaw with the American system of employer-sponsored health insurance.
Massachusetts, where the law that inspired Obamacare has been in place since 2006, has already experienced positive results for entrepreneurs. Laura Fitton, who began a social-media marketing company in the state back in 2009, couldn’t afford to provide employees with health insurance. But she was able to attract workers because she could offer them state-subsidized coverage on Massachusetts’ insurance marketplace. “People can’t live on just a vision; they need health insurance,” Fitton told National Journal in 2012. “I absolutely was able to get better people.”
But Americans in other states aren’t so lucky. According to a Government Accountability Office (GAO) review of job-lock studies, surveys have “generally found that workers with employer-sponsored coverage are less likely to change jobs, become self-employed, exit the labor market or retire than workers who are not dependent on their employer for coverage.” One study by conservative health economist Douglas Holtz-Eakin found that workers who don’t receive insurance through their employers are one and half times more likely to switch jobs than workers who have coverage through their employers.
Obamacare will end job-lock for many Americans. Those looking to leave their jobs and start their own business will be able to gain affordable insurance on their state’s Obamacare marketplace beginning this October. Plans on the marketplaces will offer robust, tiered coverage with a base level of ten “essential health benefits,” including for mental health and prescription drug services. That’s a level of coverage that simply doesn’t exist in the current individual market.
Americans will then receive federal subsidies based on their incomes to help them afford their coverage. For instance, a 35-year-old, non-smoking entrepreneur who makes $25,000 of income in his or her first year of starting a business would have to pay less than $1100 per year for a lower-level plan on the marketplace. Because of Obamacare consumer protections, individual marketplace plans won’t be able to discriminate against Americans with pre-existing conditions or charge them higher premiums based on their health status anymore, either.
Overall, the Urban Institute estimates that these various protections will encourage workers to self-employ and start new businesses, creating 1.5 million new self-employed jobs — a relative increase of 11 percent from the present. Many of these jobs will be created in high-population states such as California (248,000 new self-employed jobs) and Texas (124,000 new self-employed jobs). Thanks to Obamacare, Americans will no longer be at risk for losing their critical health care coverage — leaving them free to take entrepreneurial risks instead.