Will Obamacare Unleash A Wave Of Startups?

Some experts believe access to better health insurance rates will lead to more entrepreneurs.
October 25, 2013

Supporters of Obamacare have long claimed it could lead to a mass wave of startup businesses. No longer hinged to their jobs due to needing employer-sponsored health insurance—thanks to the new public health insurance exchanges and insurers’ inability to deny them coverage—American workers would leave behind cubicle life to pursue the joys of self-employment.

It’s a rosy idea, but will it actually happen?

A recent paper by the Robert Wood Johnson Foundation predicts that 1.5 million Americans will become self-employed thanks to the Affordable Care Act. That’s an increase of more than 11 percent from today. The authors say that “pre-reform job lock” and the inability to get affordable coverage on the individual market prevented many Americans from quitting their job to start a business. Obamacare will give them the freedom to pursue their entrepreneurial dreams, according to the paper.

Scott Shane, an entrepreneurial studies professor at Case Western University, says he’s “skeptical” of such predictions. He thinks that many people, including the currently self-employed, will see their health insurance premiums rise under Obamacare (a notion supported by a recent Heritage Foundation report). Those Americans who would see their health insurance premiums spike under Obamacare are actually less likely to pursue self-employment—or could even leave the world of self-employment in order to obtain employer-provided coverage. “The law doesn’t just affect the decision to become self-employed; it also affects the decision to remain self-employed,” Shane writes on BusinessWeek.com.

Shane notes that the Robert Wood Johnson study is based partly on a 2010 Rand Corporation report that found that business ownership rates climb 13 percent among people age 65 and older—suggesting that once they qualify for Medicare, people feel secure enough to quit their jobs and try their hand at self-employment.

However Shane says that self-employment among that age group rises for several reasons, and not just because of access to affordable health care. Many older adults turn to self-employment in order to work fewer hours or support their semi-retired lifestyle.

Overall, Shane argues, it’s too early to know exactly how many more Americans will become self-employed due to Obamacare. But 1.5 million is probably an exaggeration, he says.

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