Ryan Coonerty and Jeremy Neuner, two of the principals of entrepreneur magnet NextSpace, make the case for a health care system that isn’t tied to employment. “Ensuring that entrepreneurs have health care coverage will be a critical ingredient for our economic recovery and our future,” they write.
In the health care debate thus far, politicians and pundits have tended to focus on how reforms might affect established companies, from behemoths like General Motors to smaller enterprises like the mom-and-pop corner store. Absent from the debate is a discussion of how reform might affect entrepreneurs, freelancers, and other independent workers in today’s knowledge economy. These workers will play a vital role in our nation’s economic recovery, creating the innovations that will fuel the next wave of economic growth. Ensuring that entrepreneurs have health care coverage will be a critical ingredient for our economic recovery and our future.
Today’s entrepreneurs face daunting barriers to starting a business: tight access to credit and capital; a skeptical market for new products and services; and increased global competition. As owners of NextSpace, a coworking and innovation business here in Santa Cruz, we see dozens of good ideas every day that will create jobs, build a tax base and continue to make our region and country ground zero for global investment and innovation. Yet the strongest force slowing or stopping these ideas is not tight capital or tough competition. It is a lack of access to health care benefits for the entrepreneur and his or her family.
Here are three examples that are being replicated hundreds of thousands of times in this country, each one slowing the economic recovery and making the United States less competitive:
Sol Lipman and David Beach, two experienced tech entrepreneurs, are the creators of 12seconds.tv, a video version of Twitter. With limited capital, Lipman and Beach have bootstrapped their idea into a company that now rivals their better-financed competition. Yet, 12seconds.tv has not taken off as fast as these entrepreneurs had hoped. The reason: Beach is unable to leave his position with a major Silicon Valley Internet company because he cannot afford to lose his company-sponsored healthcare benefits. So he splits his time between his “day job” and 12seconds.tv, slowing the growth of an innovative new company. Lipman sums up his frustration when says that “there’s no doubt that we’d be a bigger company—with more revenue and more employees—if David could afford to cut the ties with his company and devote 100% of his time to 12seconds.tv.”
Like many of today’s entrepreneurs, Ryan Mills started his new company less by choice than by necessity. The collapse of the real estate market forced his development firm to layoff 20 employees and closed up shop. With two kids and another on the way, Mills quickly founded his own architectural rendering service and developed a client base. His biggest challenge was that his wife was pregnant, a “pre-existing condition” in the HMO world. As a sole proprietor with a “sick” family member, finding affordable health insurance was nearly impossible.
Eventually, the Mills family found a plan at a price tag of close to a $1000 per month, a huge cost for a start-up firm. “I started my own company in an effort to innovate my way out of this financial mess. But the search for affordable healthcare that was not employer-based was a crazy disincentive to starting a business,” Mills notes. He has built the costs into his new business, but says that the extra expense is “the difference between being able to hire a second employee or not.”
Another of our members at NextSpace tells a similar and telling story. She works as a marketing executive for an established technology company in Silicon Valley. She and two partners have worked nights and weekends to start their own company (they are in stealth mode so we have withheld their names). These would-be entrepreneurs have patented their technology, identified sales channels, and are ready to hire their first employees. But they have not made the leap because of concerns about cost and availability of health care for their families. “It is the single biggest barrier we have to starting this business,” they observe.
The United States continues to hang on to an expensive and ineffective health care system that is largely company-based. This system forces prospective entrepreneurs to choose between their ideas and the welfare of their families. Any reform in healthcare must provide for portability of benefits that does not solely rely on company-based employment. If not, we drastically reduce our country’s ability to create innovative products and services in the global economy. Who knows, there may be an entrepreneur out there with a great idea for reducing the cost of healthcare delivery. It would be a shame if she is forced to choose between bringing that idea to market and providing health insurance for her family.
Ryan Coonerty, current councilmember and former mayor of Santa Cruz, California, and Jeremy Neuner are co-founders of NextSpace – Coworking + Innovation, a business incubator in Santa Cruz, California (through which neither one of them receives health care coverage).
