Tag: government

Healthcare is a Roadblock to Startups

Note: This is the first in a series of posts about policy changes that make starting a business easier

It was the winter of 2005, and I was sophomore at the University of Wisconsin.  My business, ExchangeHut, was humming along smoothly and I decided that I wanted to focus on building ExchangeHut sites at additional college  campuses.  I figured the best way to do it was to drop some of my classes and become a part time student.  I had it all worked out, until it was time to tell my parents.  Since ExchangeHut was going well, they did not have a problem with me taking fewer classes, but they were very worried about my health insurance.

Most students are covered under their parents’ health plans, as long as they are classified as full time students.  Since I was going to take fewer than the magic 12 credits that spring semester, I was going to be dropped from coverage.  My parents’ biggest objection to me taking fewer classes to work on the business was that I would not have health insurance.  They were worried that something might happen to me and I would be saddled with a huge debt from having to pay medical bills.

I did some research and found out that I since I was a student, I could use University Health services for most of my routine care.  I still needed some form of insurance to protect me in case I got hit by a car, got cancer or fell of my bike.  After a few weeks, I settled on a plan with a $5,000 deductible from WPS.  Since I am young, healthy and willing to have a high deductible, my plan only cost about $40 per month.  Most other student founders of startups that I talked to either went without insurance or paid much higher rates for more comprehensive plans.  Luckily, I did not get sick and have never had to file a claim, but if something were to have happened, it may have crippled my ability to continue to run ExchangeHut effectively.

Health insurance is always a high priority when I talk with other young founders of startups.  Many students that I talked to were reluctant to go below 12 credits because they would lose their health insurance.  Some were not willing to try to start a company because they knew that they needed to maintain full course loads and that they would not have time to be both a student and a business owner.   Other recent grads took jobs rather than start a business partly because of health care worries. Easier, more affordable access to decent health care would make it easier for people (not just students) to make the jump to starting their own companies.  More startups lead to more successful companies, more jobs and more tax revenue.

So, how do we fix this problem?  There are many solutions, ranging from lifting the full time student requirement to national health care.

  1. National Health care – If we had national health care, we would not have to worry about health insurance, but might have to worry about quality of care and other issues.
  2. “Small Business” or “Entrepreneur” Insurance Pools – Allow entrepreneurs to buy into pools that act as buyers, similar to large corporations.
  3. State government funded “Entrepreneur” policies – State governments could allow entrepreneurs to buy state health care policies.
  4. Allow young entrepreneurs to stay on parents health care longer – Allow insurance companies to either allow young people to stay on longer for free, or give young people (and their parents) to charge more.

I personally think that options 2 and 3 are the most promising.  I would think that insurance companies would want young startup owners as customers, as they are less likely to get sick than older people.  I think that insurance companies that offered an “Entrepreneur Plan” would not only make money, but they would also be able to tout their support of business and entrepreneurship.  I think it would be a good way to get customers, too.  They could even sell the introductory policy as a loss leader to get potentially successful people into the company early.  Then, when businesses succeed, entrepreneurs might continue to use the insurance company for their growing insurance needs.  I am working with a few business owners in Madison to try to organize a form of this, but it has been harder than I expected.

I think states would also be wise to create entrepreneur policies as incentives for startups to move to or stay in states.  Wisconsin, along with many other states, have already created incentives for startups and investing, but as far as I know, no state has done anything like this with health care.  Since many startups, especially tech startups, are mobile and can be run from anywhere, incentives like affordable health care would be effective ways to attract and keep startups.  I would also like to see policies like these opened up to young people who are working in non-profits.

These changes would help people who are thinking of starting businesses, but are scared off by health care expenses.  They would also help entrepreneurs who do not have health insurance, are paying for inadequate coverage or paying too much for good coverage.  Health care is only a small part of the solution, but it is an important one.  Do you agree that health care is a problem?  What solutions would you propose?

“Live Like You Mean It” – Branding Gone Wrong

Live like you Mean It.  

That is the new slogan for the state of Wisconsin.  Apparently “America’s Dairyland” was not good enough.  The new slogan cost $50,000 of taxpayer money and it wasn’t even original: Bacardi trademarked it and has used it as a slogan to sell rum.  Motivational speakers use it as book titles, marketers put it on baby bibs, and high-minded college kids use it to discuss what they would like to do after graduation.

Its boring, unoriginal and very debatable whether Wisconsinites “live like they mean it” or if tourists are supposed to come to Wisconsin with that goal in mind.  Either way, it is a weak effort.  Wisconsin could have crowd surfed its way to a better slogan; It probably would have been better than Live Like you Mean It and wouldn’t have cost $50,000.

It brings up three rules that should should make sure to follow when they are trying to brand themselves:

  1. Do your due diligence to make sure your brand does not evoke other, unrelated products. (If it were Wisconsin and beer or brandy rather than Wisconsin and rum it might make sense)
  2. Be creative, not boring
  3. Don’t waste cash on something you could do yourself

A Free Way to Create American Jobs

The recent stimulus bill focused on creating new jobs, especially in alternative energy startups.  The cost creating these jobs is probably going to be high.  What if there were a way to create good American jobs that did cost anything out of pocket, up front?  I believe that startups are the quickest and easiest way to create  good, new jobs and new, lasting value for an economy.

Paul Graham has a suggestion that I think is not only reasonable, but also timely.  He argues that “[t]he single biggest thing the government could do to increase the number of startups in this country is a policy that would cost nothing: establish a new class of visa for startup founders.”  He says that it isn’t tax policy, employment law or Sarbanes-Oxley, but rather our immigration policy that is holding back the number of startups.  He advocates creating a new class of visa, the “Founder Visa” that would be open to 10,000 founders of startups who want to do business in the USA.

I think this is a great idea.  Unlike other types of visas, nobody can argue that immigrants on Founder Visas were taking American jobs.  In fact, they are creating American jobs.  If an immigrant on a Founder Visa creates a new startup, at some point they will need employees.  Since the startup is located in America, they will have to hire Americans.  This process creates jobs.  Not only does it create jobs, but it also increases the chances that the US will be the home of the best new companies, thereby generating more tax revenue at a time when the US has a huge amount of debt.

Graham contends that 10,000 Founder Visas could create up to 2,500 new companies per year.  Obviously, not all of them would be successful, but one would assume that at least some of them would be.  These new companies would be great for our economy and country as a whole.

Unintentional Comedy from the Treasury Department

On February 10th, Treasury Secretary Timothy Geithner gave an interview where he began to lay out some of the Obama Administrations plan to help fix the economy.  He said that the Treasury would create a website called FinancialStability.gov to keep the public apprised of the situation.

Its now March 23rd and the top of the website currently reads: