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September 07, 2007

My Commenters Is Smarter Than I: Corporations Are Sinister Edition

Cranky writes:

I have what I think is a pretty good idea for a small business that would probably employ 5-10 people. There is no way I can pursue that and take the risk of leaving my family without medical care during the typical 2-3 unprofitable startup years, so I stay in the corporate cube.

Did you say stifling of innovation? Perhaps this effect is not undesired by the large corps that have reasonably good heath plans?

My hunch is that the corporations don't much care, and quite a few of them are groaning beneath the weight of their medical coverage obligations anyway. But is there any compelling reason that our public policy and social welfare system should be set up to encourage Cranky to remain in his cube, rather than go make a better ice cream cone?

September 7, 2007 | Permalink

Comments

I just want to say that it would be totally hilarious if Cranky's idea actually was for a new and improved ice cream cone.

Posted by: Dan | Sep 7, 2007 11:22:15 AM

> I just want to say that it would be totally
> hilarious if Cranky's idea actually was for
> a new and improved ice cream cone.

Close, but not a direct hit. Then again I suspect that the majority of small startups are in some way food related so it is a big target ;-)

Cranky

Posted by: Cranky Observer | Sep 7, 2007 11:26:34 AM

I don't think GM would mind at all not having to pay for health care for its workforce.

Posted by: El Cid | Sep 7, 2007 11:40:20 AM

Dunno about you guys, but the dry cleaning cartel was TOTALLY behind my idea for the ice cream cylinder.

Posted by: Guh? | Sep 7, 2007 11:47:13 AM

> I don't think GM would mind at all not
> having to pay for health care for its workforce.

"Corporations", even just the Fortune 1000, cover a huge range of philosophies from 'don't be evil' to 'neutral' to 'be as evil as you can', so one shouldn't assume a monolith. That said, I do know some senior people within GM and their thinking on that subject has been revised just in the last 5 years - before that they definitely considered their health care benefits as a competitive weapon.

Cranky

Posted by: Cranky Observer | Sep 7, 2007 11:48:45 AM

It's thought in Europe that the nationalized health care system ends up subsidizing very large corporations.

At least, there are many less middle sized companies in Europe.

Posted by: stm177 | Sep 7, 2007 12:12:11 PM

Why is this a bigger problem then covering the mortgage or the food bill or any of your other living expenses?

Posted by: James B. Shearer | Sep 7, 2007 12:15:05 PM

James: housing and food are necessities (of a sort), but living in your car and eating at charities is a possibility.

Dying of curable illnesses is kinda permanent.

Can anyone be more clueless?

Posted by: JimPortlandOR | Sep 7, 2007 12:22:12 PM

> I don't think GM would mind at all not > having to pay for health care for its workforce.

"Corporations", even just the Fortune 1000, cover a huge range of philosophies from 'don't be evil' to 'neutral' to 'be as evil as you can', so one shouldn't assume a monolith. That said, I do know some senior people within GM and their thinking on that subject has been revised just in the last 5 years - before that they definitely considered their health care benefits as a competitive weapon.

Cranky

Posted by: Cranky Observer

There was indeed a particular reason why I specifically mentioned GM, and wrote in the present tense. It is often very important to outline differences in incentives and policy aims which differ among various large corporations or even large numbers of small to medium firms.

Posted by: El Cid | Sep 7, 2007 12:31:17 PM

Jim,

I think if Cranky's business plan involves him living in his car and eating at charities he is perhaps better off staying in cubeland.

Posted by: Dave Justus | Sep 7, 2007 12:33:23 PM

Moving into a smaller apartment, taking a roommate, or eating ramen temporarily is an option to reduce expenses while going through lean times in a business. If it doesn't work, you go back to your old situation. Dropping your health insurance runs the risk of letting a problem go untreated, which will destroy your future economic prospects or bankrupt you. Why people need this explained to them, I confess I don't know.

Posted by: Tyro | Sep 7, 2007 12:42:34 PM

Tyro, you don't drop your health insurance you pay for it yourself. If you can't set aside enough money for this you need to raise more capital. This is no different from any other startup cost.

Posted by: James B. Shearer | Sep 7, 2007 12:49:23 PM

My hunch is that the corporations don't much care.

I think you're wrong about that. Corporations are very sensitive to factors that cause them to lose trained employees. It's one reason we get new carpets every 15 years (whether we need it or not.)

I think there's a lot of senior engineers, with retirement guaranteed, that would start a new career or a new business but are all but locked to cubeland for medical benefits that would be prohibitive to drop and cannot be eliminated.

(not to be too obsequious, but having observed Cranky's posts for some time, I would back him in an instant had I any money....)

Posted by: jerry | Sep 7, 2007 12:55:24 PM

Shearer, the point is that health insurance costs are a prohibitive barrier to self employment (and sometimes, health insurance isn't even available to the self employed) in a way that other expenses are not... and that unlike other expenses, you can't really "cut down" on health insurance if you can get it at all.

Posted by: Tyro | Sep 7, 2007 1:22:28 PM

If the only thing that's holding you back is fear of health insurance, Cranky, you can COBRA your current plan for 18 months. That's plenty of time to give the idea a try and see if it floats.

Ping me if you need a review of your business plan; I did a startup myself back in the 90s and have worked at a few others. I can sanity check your financials and see if the assumptions look sound.

Posted by: fiat lux | Sep 7, 2007 1:26:11 PM

Cranky,

I did start a small manufacturing business from my accumulated assets, medical coverage is my biggest monthly out pocket expense.

I have catastrophic Insurance, which has a 6,000.00 USD deductuctable, 80% coverage thereafter and all sorts of clauses against preexisting conditions that negate it's real purpose, it's basically a single use policy which would help you if you were hit by a bus or had a heart attack....cancer not so good, you'd be forced onto another plan where that would be a preexisting condition.

I have no children or wife to whom I am responsible, otherwise starting a business would be socially irresponsible, at least while insurance companies rule medical care.

Over the years I've heard rightwing nut jobs who have no experience with protracted illness and stand alone insurance pontificate how great our system is. A couple years ago a friend found out the lie, but he was able to save his ass by going over to Thailand to get treatment his insurance company said was pointless, he's alive & well, thanks to foreign medicine.

American insurance companies would have gladly let him die to save a few bucks.

We do not live in a Democracy, 70% Americans want single payer health insurance that is not an employment benefit.

Posted by: S Brennan | Sep 7, 2007 1:41:57 PM

A couple of thoughts on this:

1) Cranky's idea probably isn’t that good. I have no idea but I'm just playing the odds here.

2) Corporations sure as heck don't want to be in the game of paying for healthcare, so let's not blame this on them.

3) I know the position because I'm in the same bought: if I had an idea that I thought was really good, I still couldn't pursue it because of my mortgage, healthcare needs for family and because I'm risk averse. I image someone less risk averse than I, and Cranky, would pursue this.

4) It would be interesting to know, in general, the ages of those that start new companies. I would guess they're either in their 20 (no family commitment) or 40 (15 to 20 years of wealth accumulation).

Posted by: DM | Sep 7, 2007 1:47:58 PM

Tyro, what percent of the required capital for a startup do you think health insurance represents? I doubt it is actually a "prohibitive" amount. And if we did go to national health insurance the additional taxes required would also be part of startup costs.

Posted by: James B. Shearer | Sep 7, 2007 2:02:25 PM

1) Cranky's idea probably isn’t that good. I have no idea but I'm just playing the odds here.

Now THAT's the American Spirit (tm) in action.

Posted by: twig | Sep 7, 2007 2:03:23 PM

I mean seriously. Good god, that's it. Screw the internet.

Posted by: twig | Sep 7, 2007 2:04:44 PM

The issue is whether Cranky can get health insurance at all. It's not that insurance premiums alone represent a prohibitive amount, or that he should just factor it into his start up costs, the fear is that by leaving his employer provided plan he will be unable to get new insurance period, or new insurance will refuse to cover (no matter what premiums he is willing to pay) a chronic pre-existing condition that he absolutely must treat. Out of pocket health costs for any number of conditions that insurance might deny coverage for are simultaneously life-threateningly necessary and absolutely prohibitive.

Posted by: justin | Sep 7, 2007 2:26:54 PM

Look, there are alternatives beyond
1) Cranky getting insurance from his employer, and
2) Cranky not having any insurance

As I've already pointed out, there's COBRA for starters. Cranky's wife could get a part-time job at Starbucks or a similar company that offers insurance to part-timers and they could get the family's insurance through her. There are also companies that outsource HR functions for startups and SMBs, you can use them to offer insurance to your company at a lower rate than going it along. And there are probably other options as well.

We here in the Silicon Valley may not know everything, but we do know how to make startups happen. Stop surfing poli-blogs and start checking out some startup blogs, Cranky, you'll find a lot more useful advice.

Posted by: fiat lux | Sep 7, 2007 2:43:29 PM

Good post fiat.... I think the real issue here is risk aversion, healthcare is just a diversion.

twig,

Having been intimately involved in the tech boom and bust, I’ve lost that positive feeling toward every new idea. Maybe I’m old and crusty now?

Posted by: DM | Sep 7, 2007 3:59:23 PM

Cranky's in a Catch-22 situation that is explored in Daniel Brook's new book "The Trap"

Posted by: Randy G | Sep 7, 2007 4:45:33 PM

Yes, a COBRA means you can continue your insurance. It doesn't mean you can afford your insurance. The last time I used a COBRA, the COBRA rate was almost five times higher than the rates I paid as an employee.

Posted by: anon | Sep 7, 2007 6:50:19 PM

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