In the weeks since the health insurance marketplaces of the Affordable Care Act went online, a well-publicized ripple of alarm and confusion has permeated the ranks of small-business owners. But less well known is the response of another contingent: newcomers to entrepreneurship who see the legislation as a solution to the often insurmountable expense of getting health insurance. Some even view the Affordable Care Act itself as a business opportunity.
The hopeful include founders of start-ups who otherwise wouldn't have access to affordable health insurance — people like Rajeev Jeyakumar, a co-founder of Skillbridge, a Manhattan-based online job marketplace for business consultants.
Mr. Jeyakumar is uninsured. But unlike many people who were thwarted by the government's faulty health care website, he was able to sign up for individual coverage three weeks ago. He will pay just $74 a month, after tax credits, for his new plan through the New York State exchange.
His story illustrates how, when finances are tight, new entrepreneurs often place the health of their businesses over their own health. "In the early days, a venture is often very much self-funded," Mr. Jeyakumar says. "You always trade off between the money you need to survive in terms of paying rent and food. And when you have health care as an additional cost, it's always very tempting to not put money into it."
But come January, Mr. Jeyakumar will have a health plan that "even includes dental," he wrote in an email. "I'm very pleased with the outcome." Until then, he's refraining from using his Citi Bike membership or playing sports, lest he sustain an injury requiring medical care.
And when it's time to hire employees, he says he will most likely avoid the extra work of administering a company health insurance plan and instead encourage employees to shop the new health care exchanges on their own and bump up their salaries to cover the cost.
Research published in the journal Health Affairs showed that small businesses with 10 to 24 employees have paid 10 percent more than large ones for the same health care coverage, and that companies with fewer than 10 employees have paid 18 percent more until now. Small businesses' plans were also more vulnerable to rate increases; as a result, they often provided less coverage, if they offered it at all, resulting in a competitive disadvantage in hiring.
Constantia Petrou, owner of Konnectology, a website that provides information on health care specialists, expects the new law to broaden her hiring options. When she started her company seven years ago in Burlingame, Calif., she realized that she couldn't afford to offer a group plan.
"In terms of hiring, the health care expenses contribute a huge, huge component to your cost of operation," Ms. Petrou says. So instead of bringing on full-time employees, she relied on contract workers.
She is looking forward to getting price information online from the Small Business Health Options Program, or SHOP, an exchange that was created by the new law. (Currently, business owners can obtain estimated SHOP prices online, but specific ones are only available by mail after filling out and mailing in a PDF downloaded from Healthcare.gov. Some states, including California, have their own SHOP exchanges, and their procedures vary.)
Ms. Petrou says the law could enable her to hire full-time employees, depending on the new costs of coverage. If so, she will either pay for a portion of the individual plans that her employees shop for on the exchange, or she may take advantage of tax credits and offer a small group plan. "We now have options to explore," she says.
Some experts say this type of flexibility may have a big impact on the economy over all.
"Assuming we get the website working, it's going to be the biggest step we've had in a long time in the U.S. in terms of changing the structure of the economy," says Craig Garthwaite, assistant professor of management and strategy at Northwestern University's Kellogg School of Management. Mr. Garthwaite is a co-author of one of two recent studies that conclude that the Affordable Care Act could spur entrepreneurship by easing job lock — where people stay in a job mainly for the health insurance.
The act was aimed at people like Jeannie Armstrong, who in 2009 was planning to quit her job within a couple of years to start a private clinic for adolescents with substance-abuse problems. But then her 18-year-old son learned that he had diabetes. Fearing that he would be unable to find individual health insurance, she has stayed in her job so her son could keep receiving coverage under her employer's health plan.
"We're talking pre-existing condition, we're talking no money, we're talking health care costs out of the roof," Ms. Armstrong says of her son's situation.
But in January, her son will be eligible for individual health insurance. That will free Ms. Armstrong to quit her job as a social worker in the juvenile court system of Fairfax County, Va., and to pursue her entrepreneurial dreams. Now, instead of opening a for-profit clinic, Ms. Armstrong has decided to go the social-entrepreneurship route. In September, she founded the nonprofit Center to End Adolescent Substance Abuse Encounters.
Over the next year, she plans to stay in her job while her son finishes school; in her free time, she will assemble a board of directors and write the organization's bylaws. By next fall, she plans to be running the nonprofit full time.
"I'm not hamstrung by having to stay in this job," she says.
Ms. Armstrong sees the new law as an opportunity to start something new. But Kevin Kuhlman, manager of legislative affairs for the National Federation of Independent Business, says that while job lock is a real concern for entrepreneurs, he remains skeptical that the new law will be able to solve the problem.
The federation unsuccessfully challenged the constitutionality of the Affordable Care Act's requirement that most people obtain health insurance or pay a tax penalty, in a case that went all the way to the Supreme Court last year. The plaintiffs were uninsured and didn't believe that the government could require them to buy insurance.
Certainly, many established small-business owners are not clamoring for information on new health coverage. Barry Sloane, chairman and chief executive of Newtek Business Services, based in New York, says a majority of his customers
haven't bothered to visit the exchanges.
"The negative publicity that's come out about the site not functioning has kept people from thinking they can go to it and get a result," Mr. Sloane says.
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