Wednesday, July 29, 2009

How the Health Care Mess Affects Entrepreneurship
by Scott A. Shanes, Courtesy of the New York Times

This article corroborates some of my beliefs that health care is not just specifically only a human rights issue: it's a socioeconomic justice issue. I have never found it fair that larger companies with stronger bargaining power get lower premiums than smaller companies and individuals. Furthermore, who pays for the companies' premiums to be lower? Certainly not the health insurance. That cost is reflected in individual and small business plans. That's just my two cents. -LBL

In response to my earlier post on declining trends in rates of entrepreneurship in the United States, a lot of people commented that the cost of health insurance was a big part of the problem. So this week I am taking a look at the effects of health care on small business and entrepreneurship.

Clearly, health care costs have reached levels that are adversely impacting entrepreneurial activity. One result of the spiraling expenses is the inability of new companies to offer health insurance to their employees. The Kauffman Firm Survey, which tracks a sample of new businesses drawn from the 2004 cohort of U.S. start-ups, reports that only 29.5 percent of new employer firms and only 12 percent of all start-ups provide health insurance to their full-time employees.

A second effect has been to lead many older small firms to reduce health care coverage. According to the Kaiser Family Foundation, which conducts an annual survey of health care costs, the majority of businesses with three to nine employees do not offer employee health insurance; only 49 percent of these businesses did so in 2008. Moreover, the foundation data indicates that the provision of health care is much lower among small businesses than large ones. Only 62 percent of companies with three to 199 employees offer health insurance, as compared to 99 percent of businesses with more than 200 employees. According to the U.S. Small Business Administration’s Small Business Economy 2009, 25 percent of the 15.7 million workers in small businesses do not offer health insurance.

Self-employed people are much less likely than other people to have health insurance. The 2009 Small Business Economy reports that only 49.3 percent of self-employed workers have employment-based health coverage, as compared to 70.5 percent of wage and salary workers. Moreover, the S.B.A. publication also shows that approximately 3.7 million self-employed people aged 18 to 64, or 26 percent of the total, are uninsured.

Small businesses also pay more for health insurance than large companies. According to the Commonwealth Fund, small businesses now pay 18 percent more than large businesses pay to obtain comparable insurance.

A third effect of the tremendous rise in health insurance costs over the last decade has been to impose a huge financial burden on new companies. The cost for the average new company to provide its employees with family health insurance at the average cost for firms of its size (as reported by the Kaiser Family Foundation) is now $68,611 a year, more than double what it was 10 years ago. Granted, some of those costs aren’t paid by the employers, and some employees have individual coverage, making the actual numbers paid by employers lower, but it’s still a huge figure in comparison to new-firm revenue. According to the Kauffman Firm Survey, the average three-year old surviving firm generates only $152,000 in revenue annually.

Finally, because leaving a job to start a business causes one to give up employer health insurance, the employer-based health insurance system in this country is keeping some people from becoming entrepreneurs. A recent working paper by Rob Fairlie of University of California Santa Cruz estimates that workers with employer-provided health insurance have 2.5 to 3.9 percent lower odds of becoming self-employed than those without health insurance, suggesting that health insurance affects the start-up decision.

To all the readers who commented on my earlier posts and got me to look at health care costs and entrepreneurship, you’ve got me worried. The health care mess is clearly weighing down entrepreneurship in this country.

Scott A. Shane is a professor of entrepreneurial studies at Case Western.

Tuesday, July 21, 2009

Growing My Hair Out, Getting a Red Dress, and the South End Open Market

Ready for a change. That is what it comes down to. I think I'll keep the bangs, but I see myself growing this out for as long as I can stand it. I am sort of liking having it a bit longer, and I miss being able to pull it back. We'll see. The fact is that since adolescence, I have never gone longer than a couple of years without changing my hair somehow. I am not that into messing with my hair color, so right now, that means growing it out. It's kinda fun.

Work is going well. I really enjoy my new capacities (well, the capacities are less new now since my promotion was in January, but they are still relatively recent). I am doing more letters and reports and am able to focus on projects and large meetings. I can't tell you what a difference it makes when you're working really hard on meeting deadlines to not have to be the front-line for phones. I still do back-up, which is totally fine, but not being front-line is such a step up. It's bizarre -- it's as if I have a career. Well, I do! It's not necessarily the one I had had in mind for myself when I was growing up, and I am really looking forward to teaching math, but I have to say, this is nice. I am really happy with the people I work with, and working downtown is super-convenient.

For example: on my lunchbreak today, I am going to walk down the Sabella Couture, where I have an appointment about my wedding dress. Yes, I am going to wear a red wedding dress, and because they are not mass-produced, I am going to have one made. I am so excited! It's going to be a chunk of change, but that's OK. All wedding dresses are. There are no pictures that I can post of it since it's going to be custom-made, but I can tell you that it's going to be more like an evening gown than a wedding dress. Strapless with a princess neckline and a fitted waist, my red dress will drape elegantly down to the floor. No train -- just a flare. Simple, elegant, and quite me. Also, when Patty and I were at the South End Open Market this weekend, I saw some headpieces that I am thinking would make excellent accompaniments. They gave me ideas, at least, and I am thinking about having something color-matched once I get my dress swatch fabric samples. (I am trying to decide between two reds).

Incidentally, I highly recommend the South End Open Market. Hot though it was, Patty and I had a great time looking at the jewelry, stationary, photos, small bags, pottery, mousepads, buttons, and glasswork, all hand-crafted. It was like a free museum. I bought a few things while I was there and it didn't break the bank at all. I was impressed. The vendors change weekly, so there's no telling exactly what it will be like, but it's definitely an experience to repeat.

Tuesday, July 14, 2009

Summer, FINALLY!

Can I tell you how happy I am that the sun is finally shining? I was getting seriously depressed there. I'm starting to suspect that I have a slight case of Seasonal Affective Disorder, since when the sun disappears for a long time, it has serious consequences for my mood, my willingness to do things, my ability to handle human noise, etc. The sun came out and everything changed. Whew! Maybe I'll take some B vitamins.

As usual, the summer season is going by quickly. It's been nice not to have classes (I won't take another class for school until the fall) and I am glad that I'm doing well in the classes and that they are serving me well. The literacy class changed the way I think about teaching math, and I wasn't expecting that. Northeastern has a really good program.

Dan and I have been in and out of Maine a bit, always with a mission, and it's sort of nice to bum around in Boston. But I will tell you, I'm getting tired of living in the city. Not sure what there is to do about that at the moment, since we're so well settled here and life is good. However, I'm feeling the "get me out of the city!" pangs now and again. We'll see. For now, we have a great apartment and we love living in JP -- especially across from the Forest Hills Cemetery -- and we're not planning anything yet.

I've been playing a LOT of Plants vs. Zombies. It's a great game. Download it now.

At any rate, now that the weather is nice, I'm thinking of taking a couple of beach days here and there, assuming that it warms up enough to justify putting on a bathing suit. YAY heat! There is nothing quite so relaxing to me as hanging out in the sun.