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Is health reform unleashing an entrepreneurial wave?

A student in the University of Portland's Center for Entrepreneurship presents his venture at the school's annual elevator-pitch competition.

Kristin Heying, director of Cafe au Play, a social venture that opened in 2010 in Portland, Ore.

Tess Vigeland: Under the Obama health care reform plan, it's supposed to get easier to find affordable insurance if you leave a job to try your hand at being an entrepreneur. That's the theory, anyway.

We sent Marketplace's Mitchell Hartman from the Entrepreneurship Desk at Oregon Public Broadcasting to find out if health care reform is unleashing a small business wave.


Mitchell Hartman: I figured I'd start looking for a "health care effect" right at the beginning of the entrepreneurial pipeline.

Jamie Kerr: My name is Jamie Kerr and I'm the founder of Rain Town Footwear. We design sophisticated urban rain boots made from recycled tires.

Students at the University of Portland's Center for Entrepreneurship are putting their business plans on the line in the annual elevator-pitch competition.

Kerr: Today I ask for $90,000 to move Rain Town forward.

Many of these students say they're ready to launch right after college. One thing helping them along: under the new health care law, they can stay on their parents' health insurance until they're 26.

Kerr: When I graduate, I don't think my company will pay benefits because they're a startup. So I probably wouldn't worry about health insurance until I was 26.

Sam Wegman: The insurance is a little bit cushy right now. So I plan on riding that out as long as I possibly can.

That's 21-year-old Sam Wegman, who's pitching... well here, I'll let him tell you.

Wegman: Hello my name is Sam, and I'm here to pitch a plan where I take my tunes to Denmark, Sweden and the Netherlands.

It's something about "digital distribution strategy for singer-songwriters" -- like himself.

Wegman: So to implement this plan, I'm looking for 12 grand.

He didn't win, by the way -- first prize went to a DIY cupcake bakery, as in "decorate it yourself." There are other health care changes coming that'll benefit the self-employed and people who want to jump jobs. Starting in 2014, state insurance exchanges will let individuals and small businesses join together to shop for coverage. And insurance companies won't be able to deny coverage or set sky-high rates based on age or preexisting conditions.

Paul Fronstin: The insurance market reforms and the health insurance exchanges, in some ways, will allow you to de-link health benefits from your job.

Economist Paul Fronstin at the Employee Benefit Research Institute says the goal is to give everyone access to the kinds of plans big employers offer. And then let people keep their coverage.

Fronstin: And that will give people an opportunity to take risks as far as opening up a business, without having this fear about being denied health insurance coverage.

That fear leaves many mid-career professionals shackled to jobs they'd like to leave. Business consultant Gene Marks says insurance reform could give these people -- with a Rolodex full of contacts, and a cupboard full of cholesterol and blood-pressure medications -- a sort-of "get-out-of-my-9-to-5-job-free" card.

Gene Marks says it can help companies looking for new blood, too.

Gene Marks: Sometimes there are people you'd like to hire or you'd like to work with, but you can't because they have a preexisting condition. They can't leave their company, they can't change their health plan -- it's very restrictive. Now, with that new legislation, it does open up more opportunities for business owners to go out and grab people and some talent.

People who do go off on their own will be eligible for subsidies to buy insurance. Sara Horowitz of the Freelancers Union says those subsidies phase out just under $90,000-a-year in income. She says reform will increase access, but it won't necessarily hold down cost.

Sara Horowitz: People that are, let's say, moderate-income earners -- kind of like your working middle-class people -- are still going to be having problems. With the increase in medical inflation, it's just going to cost more in the next few years.

Fledgling businesses now have access to subsidies to help them offer insurance to their employees. But it's still going to be a struggle for anyone founding a startup.

Kristin Heying: I call myself the director, you pretty much have to take on many, many different roles. Grocery shopping, going to the bank, putting the money in.

Kristin Heying helped turn this former meth house in Portland into a community-center/coffee-bar called Cafe au Play.

Heying: We're getting ready for a work party tomorrow with pastries and coffee.

She believes in offering health insurance to her three employees, but says she can't afford it right now. She's on a government-subsidized plan herself. Heying's 41, raising a daughter, and at times she's gone without coverage. One of those times, she ended up with a trip to the emergency room... and a $2,500 bill.

Heying: Especially during the time when I was very sick, it really did make me think, "I wish I'd stayed in teaching, because I would have health coverage." But it would have been years of working on this. And I felt very strongly about finishing what I had started.

She just hopes health care reform will make finishing with insurance a little easier.

I'm Mitchell Hartman for Marketplace Money.

About the author

Mitchell Hartman is the senior reporter for Marketplace’s Entrepreneurship Desk and also covers employment.

Kristin Heying, director of Cafe au Play, a social venture that opened in 2010 in Portland, Ore.

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For years I've been talking about the fact that more people would be self-employed if they didn't have to be an employee for the health insurance. I know people taking up jobs only for the health insurance. Other people could have those jobs and the entrepreneurs could strike out on their own. I don't know anything about this particular reform, but we've got to do something.

"People who do go off on their own will be eligible for subsidies to buy insurance."
Does anyone understand the meaning of "subsidy"? It means taxpayers help pay your bills.

Greg, you are right about employers dumping employees because of the cost of health insurance. We don’t have to wait until 2014, though – it’s happening right now, and so are a lot of other things. Older workers are losing jobs at a higher rate than younger ones, and complaints about age discrimination are going through the roof. But this is all part of a much larger trend. A global economy means that the United States is no longer the pre-eminent player on the world stage. Economic forces demand that the standard of living achieve parity with the rest of the world. It also means that traditional jobs with traditional companies will be getting scarcer. For many people the only avenue to make a living is entrepreneurial, but even the concept of entrepreneurship may be changing. For example, recently an academic conference examined the concept of employee/investors – a model in which a percentage of “employee” earnings is deferred into company equity. It solves the problem of capitalizing a new venture, (and puts banks into a new position), but blurs the line between employee, entrepreneur and investor. So many things are changing at such fundamental levels that we should anticipate a very different world than the one that ended in 2008.

This piece sounds a lot like the sort of "be your own boss" rhetoric we heard in the 90's, when businesses were freed up from cumbersome labor laws and even the legal obligation to pay their workers minimum wage. These people aren't going to have to worry about being tied to their jobs for the health care benefits provided, because their employers will be dumping them en masse in 2014 when inidividuals will be required to purchase health insurance from private unsurers by law. Why would any employer assume the cost, when they can have their HR departments screen all new employees for current insurance coverage, and trump up bogus reasons to get rid of those who haven't taken the entrepreneurial initiative?

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