The link between entrepreneurship and pre-existing conditions

The arguments about health care policy aren’t just arguments about health care economics. They’re actually about American support for innovation.

Let’s lay it out.

First, entrepreneurship. According to a study by Pierre Azoulay and three other authors in the Harvard Business Review, the average age of a successful startup founder is 45. Here’s some of what they wrote:

Our team analyzed the age of all business founders in the U.S. in recent years by leveraging confidential administrative data sets from the U.S. Census Bureau. We found that the average age of entrepreneurs at the time they founded their companies is 42. But the vast majority of these new businesses are likely small businesses with no intentions to grow large (for example, dry cleaners and restaurants). To focus on businesses that are closer in spirit to the prototypical high-tech startup, we used a variety of indicators: whether the firm was granted a patent, received VC investment, or operated in an industry that employs a high fraction of STEM workers. We also focused on the location of the firm, in particular whether it was in an entrepreneurial hub such as Silicon Valley. In general, these finer-grained analyses do not modify the main conclusion: The average age of high-tech founders falls in the early forties.

But that’s just the average age. Many successful startup founders were older.

Older founders have experience and skills that young founders lack. For every 25-year ready to create the next Facebook, there is a 50-year-old medical researcher who’s got a new approach to caring cancer — and is raising money for it right now.

What do we know about these older founders?

They probably have some money in the bank — but a lot of that is probably going towards their startup.

They are much more likely to have families and children.

And finally, they probably have pre-existing medical conditions.

At 60, I have these conditions: obesity, recurring orthopedic problems in my back, treatable high blood pressure, sleep apnea, and a thyroid deficiency. I had those problems when I was in my forties and fifties as well.

If you know someone who is 40 or 50 or 60, they probably have pre-existing conditions as well. These conditions are treatable, often at reasonable cost, with health insurance. They allow us to continue living, working, and innovating.

How pre-existing conditions affect the health care market

Here’s what’s happening with the Affordable Care Act: 20 states have sued the federal government claiming that the the part of the Affordable Care Act that mandates that insurers cover pre-existing conditions is unconstitutional. The Trump Justice Department is refusing to defend this part of the ACA in court. (I’m not making this up — here it is in an NPR article.)

If these states get their way, they will set up marketplace with alternative health plans that don’t cover pre-existing conditions. What do you think would happen then?

First off, healthy young people would be able to get very cheap insurance. If you’re young and don’t have thyroid problems, orthopedic problems, or high blood pressure, you’re in great shape. The insurance company knows your health care is unlikely to cost very much, on average. This would significantly increase the number of people insured, even without the individual mandate that Republicans removed in the tax plan they passed.

For the rest of us, though, the cost will go up. Take me. If I lived one of the states with these marketplaces, I’d have two choices. I could get insurance that didn’t cover my pre-existing conditions. So if I needed back surgery, or had a stroke related to high blood pressure, I’d be paying out of pocket. And cancer rates are higher for overweight people. Would I be covered if I got cancer? What do you think?

Alternatively, I could buy insurance that covered all my conditions, but of course, that would be quite a bit more expensive. The insurance I have costs over $20,000 per year for the four people in my family. It’s hard for me to imagine how I could remain a sole proprietor and continue to pay a lot more than that.

This isn’t about me, but as I’ve shown, anyone in their forties and fifties is likely in the same boat.

All is not lost, of course. But if we allow marketplace that discriminate against people with pre-existing conditions, then we are restricting entrepreneurship to these groups:

• People who prefer to live without health insurance. (Just a guess, but I think most of these people are too dumb to be effective entrepreneurs. On the other hand, they are risk takers . . . )
• Young healthy people.
• People who are married to somebody who has a job with health insurance.
• People who live in states that mandate pre-existing conditions coverate. (Massachusetts and California, for example, are likely to be among these states, but Texas isn’t.)

And remember, this doesn’t just apply to classical entrepreneurs. It applies to people opening retail establishments, artists, Uber drivers, consultants, and freelancers. Fifteen million Americans are self-employed.

And we self-employed people are the core of innovation in America. Incredible companies like Facebook, LinkedIn, and Altimeter were all started by innovators with big ideas who needed health insurance.

Do Texas (and these other states) really want to insist that all their entrepreneurs are either healthy or working for other people? Is there a single woman in Texas who’s recovering from cancer and has the next great American idea — but will have to choose between her health and her startup dream?

Unsuspected connections

One lesson here is to think a little more deeply about policy positions.

Everything is connected. Just as pre-existing conditions in health insurance and entrepreneurship are connected, so are tariffs and car ownership. So are student loans and the supply of doctors educated in America. So are fiscal deficits and the state of infrastructure.

When you see a political proposal, ask “what would that mean for . . . ?” Because what sounds reasonable in the short term might undermine something you care deeply about in the long term.