Silicon Valley Watcher - Former FT journalist Tom Foremski reporting from the intersection of technology and media

Public Healthcare Could Cut Startup Costs And Help Spur Innovation

Posted by Tom Foremski - November 13, 2009

I was looking at a survey of small businesses and whether they would cancel their healthcare plans if public healthcare were available.

VerticalResponse, which offers surveys and email marketing services, polled 831 small US businesses about the effect of public healthcare on their business.

Theron Kabrich the CEO of The San Francisco Art Exchange, was one of the small businesses surveyed. He made an interesting comment and it is one that is very applicable to Silicon Valley.

"A public offering of healthcare unburdens small businesses and entrepreneurs alike, as it allows them to focus on core parts of their business such as innovations and new products. It also removes an unfair competitive advantage for small businesses when trying to attract the best employees, and levels the playing field."

Will Silicon Valley startups cut their current healthcare plans? They might.

High healthcare costs are a large burden for Silicon Valley startups. The availability of public healthcare should lead to lower costs for startup companies and make more capital available for investment in development.

VCs might demand a provision that their startups not offer healthcare plans. Would this harm recruitment?

Probably not because startups have fairly young staff and the attraction is not getting a safe job with benefits, but a chance to build a valuable business.

It'll be interesting to see how the availability of public healthcare affects Silicon Valley businesses.

- - -

The VerticalResponse survey found that one quarter wouldn't cancel their healthcare policies.

There were considerable disparities between different sized businesses. Of those with less than 10 employees, 72% offered no healthcare compared with 24% of businesses with 11 to 100 staff that offered no healthcare.

Here are some more findings:

- 40.9% of businesses with 11-100 employees wouldn't cancel their employer-provided coverage if there was a public offering and the largest portion of businesses with 1-10 employees also wouldn't.

- Of all small businesses an average of 16% of businesses would cancel their employer-provided coverage if there was a public offering.

- 71.8% of businesses with 1-10 employees do not offer healthcare to employees--versus the 69.4% of businesses with 11-100 employees who do offer healthcare to employees.


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