Republicans — the party of free markets and individual responsibility — have put repealing the Affordable Care Act (ACA) at the top of their agenda. Except repealing ObamaCare may have an unintended consequence that is decidedly un-Republican: squashing entrepreneurship and making life harder for small-business owners.
In the interest of full disclosure, I worked hard on the implementation of Massachusetts healthcare reform as a health plan executive on the front lines of getting people insured. I also helped our health plan lead the transition from the state reform to ACA compliance.
I have spent a lot of years on this. I had an upfront seat to what wasn’t optimal about the legislation, and I also saw firsthand its success.
The bottom line? I do not want to see it fall apart.
I know the ACA was a lifesaver for people who had previously been unable to afford to go to the doctor. One of the first members we enrolled in Massachusetts was a 28-year-old woman who had not been to a doctor in 10 years — her entire adult life. I knew that protection from discrimination for cancer survivors and others with chronic diseases meant that ongoing care and screening could be affordable and even lifesaving.
But I hadn’t counted on hearing so clearly that the ACA enabled individuals to start their own businesses. Simply put, the availability of quality health insurance enables entrepreneurship.
{mosads}I spoke to one mother of two in Illinois whose husband had recently started his second business. “He doesn’t have a college degree,” she told me, “So if he wants to make money, he has to do it himself.” In the early days of his startup, with no income coming in, this family qualified for a heavily subsidized plan. My interviewee knew that when money started flowing from the business, they would have to pay back the subsidy, but she was thrilled to have coverage for her family.
Without the ACA, she said they would have to “fly solo.” She was not sure what they would do without it. “Because of ObamaCare, I’m getting coverage which I otherwise wouldn’t have. This absolutely enables my husband to start this company. And I think about how many people will he employ because he can do this.”
Academic research supports the anecdotes. A 2016 Harvard Business School Working Paper by Gareth Olds showed that the Children’s Health Insurance Program reduced the rate of uninsured children by 40 percent and increased self-employment by 15 percent, firm creation by 26 percent, and business share of income by 12 percent.
Olds found that the availability of public insurance enables entrepreneurship by lowering risk to the entrepreneur. This is intuitive to any parent: It’s hard to do anything that could leave your children vulnerable, but if you know your children are taken care of, you can more easily consider taking a risk.
Logically, the ACA extends this premise. It not only expanded Medicaid coverage in many states — giving more children insurance coverage — it also improved market mechanisms for individual and small business insurance. First and foremost, the law created a virtual shelf on which insurance products could sit. Individuals could shop for health insurance via an efficient online channel. They might not love (or even like) the options, and they still had to wade through opaque insurance jargon, but the options were laid out side by side for the first time.
Other less obvious regulations made a difference, too. Consumer protections were set up to create confidence and prevent predatory behavior. For example, the actuarial value of insurance products was set out in tiers, ensuring an underlying level of quality and comparability across carriers. If one bronze plan costs a lot more than another, you know you are not looking at a difference in underlying value, but rather a tradeoff you might choose to make in order to access a specific provider or brand.
The ACA eliminated insurers’ ability to price health plans according to an individual’s medical history, and instead applied an adjusted community rating system, where pricing was set by broader demographic factors. Though this squeezes insurance companies’ ability to manage their risks with higher-cost individuals, it also forces them to keep prices within a more reasonable range, which allows more people to buy in.
Fundamentally, these rules make it easier for individuals to buy health insurance. With insurance, more of those individuals can (and do) take the leap into a new venture. These ventures not only have the potential to create jobs for others, but they are also vital to the American psyche and culture.
Can Republicans really turn their back on such an important factor in entrepreneurship? The only mention of health insurance in the GOP platform plank, “Restoring the American Dream,” is found in a section on “Workplace Freedom” and advocates for the “portability” of health insurance.
But slashing the system that actually allows individuals to buy their own insurance is simply inconsistent with the value of individual empowerment, a key GOP theme.
Republican replacement proposals largely punt on true market mechanisms. Secretary of Health and Human Services Tom Price’s plan, for example, scraps the marketplaces altogether in lieu of tax credits (which do not help people without income, such as entrepreneurs in their early startup days).
Whatever happens with the policy changes, Republicans would be well-served to think hard before eviscerating actually accessible health insurance markets that reward Americans with the grit and courage to build their own opportunities.
They can call it whatever they want, but I hope they don’t spite their own base (and the majority of Americans who did not vote for President Trump) by abandoning their principles solely for political expediency.
Deborah Gordon is a seasoned executive specializing in healthcare innovation, strategy and marketing. She most recently served as CEO of Voxent Health Care Technologies, and is working on ideas for disrupting the status quo in healthcare.
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