Becoming an entrepreneur and starting a business involves taking on a lot of risk. And oftentimes, especially in the startup world, it helps to start from a position of privilege—whether that means having an elite university degree or a family trust fund—to take on that risk.
Though it’s not talked about as much, being young, healthy, and insured is also one of these privileges.
Today, as open enrollment begins on the new government-run insurance marketplaces created by the Affordable Care Act, a big part of that advantage will be eliminated—making it easier than ever for people to make the leap from being a full-time employee to employing themselves and potentially starting new businesses.
"This is a big deal for entrepreneurship. I think that this is a new era for people who want to become entrepreneurs, especially if one of their limiting factors is leaving the group marketplace," says Kevin Lucia, a senior fellow at at Georgetown University’s Health Policy Institute.
Lucia co-authored a recent analysis that estimates, state by state, how the law will impact the number of people who are self-employed.
The paper estimates that about 1.5 million more people nationwide will become self-employed after the full effects of the law, including the universal availability of non-group coverage, the financial assistance available, and other market reforms, are implemented—an increase by more than 11% from today. The largest states to be impacted will be California, which may see up to 248,000 additional self-employed individuals, and Texas, at 124,000. The analysis assumes no changes will take place in Vermont and Massachusetts, which already have enacted their own reforms that provide comprehensive coverage to individuals who are not tied to their employers.
The changes will especially affect the kinds of people who may start businesses and ease gender disparities. In the past, in most states, insurance companies could deny individuals coverage based on health status, risks, and existing conditions, or charge higher premiums that make coverage unaffordable. It has also been expensive to obtain a comprehensive plan that includes critical benefits like prescription drugs, maternity, and mental health services.
"Say if you’re a woman of childbearing age, are you really going to leave your job with your insurance plan to become self-employed?" Lucia asks.
On the new exchanges, insurers can’t discriminate on coverage or price based on the risk of incurring health costs and must provide comprehensive plans that meet minimum benefit requirements.
To make the estimates, the researchers looked at earlier studies that have calculated the effects of insurance availability on self-employment rates. For example, when New Jersey implemented some limited reforms in the early 1990s, one study found that self-employment rose 14% to 20% higher than it would have absent any reforms.