To emerge from the most severe economic downturn since the Great Depression, we are depending on entrepreneurs and start-ups -- young and small businesses -- to do what they have historically done for the United States: fuel economic growth by creating a disproportionate share of the new jobs we need. As President Obama's Chief Technology Officer, I devote much of my energy to creating a fertile environment for high-technology start-ups in areas like information technology, clean energy, biotech, transportation, manufacturing, and robotics.
To get a better understanding of their needs and concerns, I've met with entrepreneurs, CEOs, and venture capitalists from Silicon Valley to Chicago to Virginia. And I've gotten one message repeatedly: The high cost of health insurance is inhibiting our growth. We can't afford to provide the same health benefits as larger companies -- or, in the case of many new start-ups, any health benefits at all. Due to the burden of health insurance, we can't hire the people we need to grow. There's even a term for this: "Job lock."
In other words, America's innovators -- those who are creating the jobs of the future -- are being held back by our health insurance system. They find it hard to launch, hard to hire top talent, hard to expand, and hard to compete internationally. The reasons are clear: Premiums have more than doubled in the last decade. Small businesses pay 18% more for coverage than their larger counterparts, and their premium rates can rise precipitously depending on the health of the workforce. Rather than spend their money to create a new product, hire new workers, or pay higher wages, start-ups and small businesses have to finance increasingly expensive health benefits.
This dynamic -- the negative effect of our health insurance system on innovation -- was captured earlier this week in a New York Times piece, "If Health Care Reform Fails, America's Innovation Gap Will Grow." And America's entrepreneurs agree.
Here, for example, are observations from Eric Schmidt, CEO of Google, who wrote Senate Leader Harry Reid (PDF) with his personal endorsement of reform just today:
"I write as part of an industry that prides itself on attracting the best, innovative talent. All os us in Silicon Valley are noticing two disturbing trends: people are staying in their jobs because they can't take their health insurance with them. Others are choosing jobs with established companies that provide health care rather than taking risks to start or join new companies.
"It is precisely those start-up companies that generate most of the new jobs and are the laboratories for new technologies that will keep out country competitive globally."
From the energy sector, Conrad Burke, President and CEO of Innovalight, a pioneering solar energy innovator, reports that:
"As a leading US solar energy company here in Silicon Valley, we’re facing health costs that have doubled in the past decade. As a startup company, we’re spending an unreasonable and disproportionate amount on healthcare costs that might otherwise be used to accelerate development of our products or hire new employees."
And for one more perspective, Amit Chatterjee, CEO of Hara Software talks about the challenges unique to growing, but small businesses:
"Hara is a green company that helps organizations grow and profit while optimizing natural resource consumption and minimizing environmental impact. We continually look at providing our employees the best possible benefits to enable them to focus on growing the company. As a small but fast growing company, insurance costs are higher than the cost savings offered to larger organizations. The high cost of benefits limit our ability to provide fully comprehensive benefit options. Having limited benefits to offer to our employees limits our ability to recruit and retain employees due to the higher cost of benefits in comparison to large organizations. The constant struggle between funding more competitive benefits for our employees and focusing on growing the business to remain innovative and competitive overall in the market, overall comes at a high cost due to benefit cost being so high."
Aneesh Chopra is Chief Technology Officer