A train wreck for startups may well be underway. The Republican-led Congress is determined to gut the Affordable Care Act without a coherent or reassuring plan for its replacement. While an estimated 20 million Americans who now depend on the Affordable Care Act (ACA) will be hard hit, the implications for the entrepreneurial community are particularly concerning. Already we have heard heart wrenching stories from citizens who fear that they won’t be able to pay for costly cancer treatments or who will need to delay potentially life-saving surgeries. Many will surely suffer greatly, and we probably have no idea how many might actually die. Even those not in extreme situations have started to worry about the future. What will they do if they lose their health care altogether?
Regrettably, these stories do not seem to be compelling enough to Republicans who advocate repealing the law with no alternative plan or safety net in place. Even those who have, for the moment, stopped calling for quick repeal have yet to agree on the details for insuring those now covered under the ACA.
I would like to add an additional argument to this conversation: repealing the Affordable Care Act is bad for entrepreneurs, the economy, and innovation.
When the ACA was passed in the spring of 2010, it opened up huge opportunities for the entrepreneurial community of startups, contractors and freelancers. Finally entrepreneurs could free themselves from large corporations and start their own businesses, even as they maintained their family’s access to health insurance. In fact, a recently published report from the U.S. Health and Human Services Agency states that “One in Five 2014 Marketplace Consumers was a Small Business Owner or Self-Employed.” Barbara Ingram, an entrepreneur working with the The Paramount Group.us, Inc. in Florida says that “The ACA was not only a big help to us and our employees, but it made us more competitive when looking to grow our workforce. It took benefits off the table as a bargaining chip.” After the law was passed, Victoria Lai was empowered to leave her job as a presidential appointee at the Department of Homeland Security to open up Ice Cream Jubilee, named one of the top ice cream shops in America by publications including Thrillist and Food & Wine magazine. She valued the “peace of mind” the new law gave her and other budding entrepreneurs. After researching the plans offered on the exchange, entrepreneurs like Ms. Ingram and Ms. Lai were thrilled to see that they could enjoy insurance benefits that were on par in quality and cost with benefits that large corporations offer.
It should not be underestimated how liberating this was for not only Silicon Valley and other startup epicenters around the country, but also for small businesses across the nation. Sam Altman, the president of Y Combinator and a well respected Silicon Valley entrepreneur, recently wrote a blog post about how the ACA allowed many entrepreneurs to launch their startups. He shares 19 founders’ stories including Mike Knoop, the founder of Zapier, a tech company that connects apps to improve efficiency. Because of the ACA’s rule allowing people under the age of 26 to stay on their parents’ insurance, Mr. Knoop was able to have medical insurance while he was building his company. Zapier now has more than 50 employees. The ACA was also “life changing” for Brian Merritt, the founder of Seed which offers an improved banking experience for small businesses. Mr. Merritt, like many Americans, has a chronic health condition that needs to be closely managed. Before the ACA law was passed, he was ineligible to purchase insurance on his own because of his pre-existing condition. The ACA made it possible for him to have insurance and manage his health so he could start his company.
People working for companies like TaskRabbit, Uber, Lyft, Instacart as well as those renting their properties on Airbnb are now empowered to purchase insurance on the Exchanges. They can work full- or part-time, become their own boss, make their own hours, balance work and school and take care of sick family members, young children, or elderly relatives while maintaining the flexibility that is nearly impossible in most conventional jobs. Chris Acker CLU, an insurance agent in Palo Alto, explains that “people aren’t forced to take a job just for the benefits. They can take a risk, go to a small company and be part of a venture early on. The ACA gives people flexibility.”
Repealing the ACA will actually create stumbling blocks for innovation. Entrepreneurs create value in the form of jobs, a lot of jobs. For example, Facebook alone has over 15,000 employees. These, in turn, create new sources of taxable income for local, state and federal treasuries. Without affordable health insurance for owners and employees of start-ups, many fledgling companies, will not be able to get up and running. Innovation will be stymied in a big way.
As an entrepreneur myself, I have experienced this first hand the benefits of the ACA. We have been able to bring, Tangelo, our innovation lab, to a higher level. We didn’t always have that freedom. Because our twin sons had the pre-existing condition of premature birth, our family was ineligible for almost all health insurance plans except for one that cost us close to $40,000 a year. After the law passed, our costs were cut by more than half. The savings were immediately applied to our company’s needs. We were able to hire additional personnel and move out of our garage into an actual office space, and as a result, our business has more than doubled. But it’s still precarious - a return to huge health care expenses could halt or even reverse the progress we have made. And there are hundreds of other companies who could tell similar stories.
This is why Congress must act with common sense and compassion, and not allow a runaway train to leave the station. Everyone needs affordable health care, and that includes entrepreneurs, yes, even in Silicon Valley. If we want to see an increase in good, new jobs, we’d best hold onto the Affordable Care Act. Let’s improve it, but certainly not repeal it.