Health Care Reform and the Positive Effect on Entrepreneurship

I’ve also argued that if we don’t reform health care, people who think they will be able to keep their current health coverage will find out otherwise, and that health care reform will have a positive effect on entrepreneurship:

Fixing Health Care Is Good for Business, by Gary Locke, Commentary, WSJ: …There has been a lot of talk about the 47 million Americans who do not have health insurance. But health-care reform is just as important to the majority of Americans who have health insurance now. Absent reform, the price of an average family’s insurance will nearly double over the next decade—to $25,000 from $13,000.

No less troubling are the stories I hear from CEOs, entrepreneurs and workers. Rising health-care costs are crushing American companies—particularly small businesses that are the source of much of our economic vitality. …

The pernicious price of runaway health-care costs also has a dampening effect on entrepreneurship.

How many aspiring owners of businesses are locked in jobs they don’t like for fear that striking out on their own would cause them to lose their health insurance? The Small Business Majority, a national advocacy group, estimates there are as many as 1.6 million. …

The bills working through Congress are moving in the right direction… We must keep moving forward. …

Because insurance costs are obscured by the employer based system that we rely upon for much of our health insurance, most people don’t realize how much they pay for insurance now, let alone the costs they will face in the future. This lack of transparency about the actual insurance costs faced by a typical family creates unnecessary confusion and fear. When, for example, people hear that reform means they might have to pay, say, $8,000 for insurance coverage, they balk at the figure even though it actually saves money and would result in their receiving higher wages (research suggests that the total wage plus insurance bill that firms pay is relatively stable so that a fall in the cost of insurance translates into higher wages). And even if people know how much the insurance costs, the belief may be that the employer is actually paying for the insurance, or at least a significant portion of it, but that is not what research on the incidence of the insurance costs suggests.

About Mark Thoma 243 Articles

Affiliation: University of Oregon

Mark Thoma is a member of the Economics Department at the University of Oregon. He joined the UO faculty in 1987 and served as head of the Economics Department for five years. His research examines the effects that changes in monetary policy have on inflation, output, unemployment, interest rates and other macroeconomic variables with a focus on asymmetries in the response of these variables to policy changes, and on changes in the relationship between policy and the economy over time. He has also conducted research in other areas such as the relationship between the political party in power, and macroeconomic outcomes and using macroeconomic tools to predict transportation flows. He received his doctorate from Washington State University.

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