GOP Health Care Plan May Pinch Startup Workforce

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By Michaela Ross

Startup founders and low-income gig economy workers would receive fewer government tax credits to buy individual insurance policies under a House Republican health care overhaul proposal.

Tech startup advocates are taking a wait-and-see approach for now about the legislation, which the House Energy and Commerce and Ways and Means committees plan to mark up March 8. But there’s unease about how the proposal may impact business.

Tech startup advocacy groups and incubators such as Y Combinator, which helped launch Dropbox and Airbnb Inc., have voiced concerns that rolling back the Affordable Care Act (ACA) health care law without an adequate replacement could cut the number of entrepreneurs willing to take the risk of launching a company.

Entrepreneurs and small business owners are heavy users of the marketplace exchanges created by the ACA. Part of the law’s appeal to these groups is the tax credits available based on income, which tech founders and their employees often have less of as they launch companies.

The GOP measure, the American Health Care Act, unveiled March 6, instead would provide tax credits for health insurance based on age. That approach would cut government assistance to individuals making less than $40,000 a year, according to Kaiser Family Foundation data.

One in five people who bought insurance through ACA marketplaces in 2014 were self-employed or small business owners, according to U.S. Treasury Department data. Between 65 and 69 percent of those individuals had incomes below $65,000, according to the report.

Engine, a tech startup advocacy group, is waiting to see how the bill may change in later drafts before taking a position but said any changes that make it more difficult for founders to access coverage could decline entrepreneurship.

“For entrepreneurs and small businesses that may have been relying on the ACA for coverage, changes could really impact risk tolerance and their capacity to provide coverage for employees and themselves,” Evan Engstrom, executive director at Engine, told Bloomberg BNA.

The GOP proposal would permit $2,000 in annual tax credits for individuals under age 30, with increases of $500 for each decade until age 60. A 27-year-old making $20,000 would receive $2,000 in tax credits under the GOP plan, versus $3,225 under the ACA, for the year 2020, according to Kaiser Family Foundation data. A 40-year-old at the same income level would receive $3,000 under the GOP plan, versus $4,143 in tax credits under the ACA. A 60-year-old would receive $4,000, compared to almost $10,000 under Obamacare.

Christopher Breene, founder of Washington DC-based digital strategy startup GFTB DIGITAL and an organizer of DC’s Tech Meetup, said the GOP approach would impact entrepreneurs who choose to take a low salary while building their company, especially those that haven’t received seed or a Series A funding round.

“Founders will take the lowest salary they can afford to live on,” Breene said.

To contact the reporter on this story: Michaela Ross in Washington at mross@bna.com

To contact the editor responsible for this story: Keith Perine at kperine@bna.com

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