Job Lock: It’s Real, and Obamacare Reduces It a Lot

How many people do you know who truly love their work? My hunch is that your answer to that question is, at most, something in the neighborhood of “oh, maybe a few.”

And of those few, how many do you think would continue in their work if they had some million of dollars stored up, floating their boat, and knew with 100% certitude that those dollars were enough to last them a lifetime, even if they lived to be a hundred and fifty? My hunch is that your answer to this question would now be something in the neighborhood of “oh, quite probably not a single one of ’em.”

So let’s assume that most people work because they have to work — that they have to work because they have to make a living.

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Now, contrary to some numbskull sort of logic, by no means is this most-people-work-because-they-have-to-make-a-living idea tantamount to saying that people don’t find value in being productive, or that they’re lazy. To the contrary, as best I can tell, just about everyone feels at least a bit off-kilter, and some people just fall to pieces entirely, when they’re not endeavoring in one way or another. After all, even stone-cold slackers come to know, at some point, perhaps later rather than sooner but eventually, that stone-cold slacking is not all there is to life, my friend.

This concept comes up often enough in my work with clients that I’ve come to encapsulate it within the phrase fish gotta swim. So, just as fish gotta swim, you, I suspect, gotta do something that you find productive — something that feels worthwhile, something that helps you feel good about yourself, something that naturally finds your internal self just a’whistlin’ a happy tune just because. I in turn encapsulate this concept within the phrase worthwhile endeavoring, to connote that, yes, it’s doing that we’re talking about here, but, yes again, it’s doing that, for you, constitutes something much more than merely doing. And, yes yes yes, I s’pose you can also think of this in terms of self-actualization and the like, but I much prefer to make up my own lingo, ya know?

So, just as fish gotta swim, you, I suspect, gotta do something that, at its core, has an element, hopefully major, of worthwhile endeavoring. And if you don’t, why, then, pretty soon you just might find yourself — your entire self — feeling detached from something important, at which point you might feel like a big ol’ bump on a log, just takin’ up space and killin’ time.

For most people, then, making a living and pursing their worthwhile endeavoring are the two birds that hopefully one stone — their job — doth simultaneously check off.

And so it behooves all of us to be making our livings via something that is also a just-right-for-us sort of worthwhile endeavoring — something that approaches the perfect swim for each of us particular fishies, so that we can happily be productive all the live long day — rather than making a living doing something that finds us biding our time while we work, so that we can rush home afterwards to do the swimming we needs to be doing.

There is a righteous conjunction, then, where making a living and worthwhile endeavoring can come together for each of us.

The problem is, though, that it’s hard — very hard — for most of us to find that conjunction; that’s what the questions in the first paragraph above were all about. So it makes sense that we as a society should do our best to make it possible for more folks to find their ways ever-closer to these sorts of conjunctions, yes? Because the more we can structure our economic system to allow these conjunctions to flourish as deeply and as widely as possible, the more happiness among the all the little swimming fishies — us — there will be, and, with that result, the more evolved and beautifully-designed will our economic system also be, right?

For our economic system would then be a vastly improved system for allocating our most precious, most unique, most oft-wasted natural resource: our human capital.

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I am thankful to live within what most consider to be the technology capital of the world — the expanse from San Jose to San Francisco and everything nearby, centering more or less on Palo Alto, which we label Silicon Valley (and which most of us pronounce SILikin Valley, even though the element found on the periodic table is pronounced siliCON). I’m thankful because technology, from indoor plumbing to the Internet, has been an overall wonderful thing for peoplekind, and because it’s great having the effervescent tech world as part of everyday life (though there are some downsides).

In Silicon Valley, entrepreneurs entrepreneur a lot, so I work with a lot of people with entrepreneurial bents. And that means that I have counseled quite a few people on how to smartly leave their comfortable jobs with steady paychecks and benefits to take a walk on the wild side of trying to build sumptin’ from nuttin’ because, like most things in life, there are smart ways and dumb ways to set out on that walk. Sadly and shamefully, much of that counseling turned not on whether the idea made business sense, but rather, on, of all things, health insurance. That’s right: friggin’ health insurance would be a main topic of conversation.

And so you may ask: just why on earth would an entrepreneurial go/no-go decision have anything to do with health insurance?

And so too may you ask: what’s wrong with that picture, and how did it come to be?

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To answer those questions, let’s take a look at that picture, shall we? And let’s do that by using a hypothetical, though heretofore all too common, situation.

We start with an entrepreneur who has a great idea for a business — a classic disruption-of-the-old-guard-by-the-young-whippersnapper-get-it-done-superhero sort of idea — but the business is not the sort that angel investors or venture capitalists would find interesting, so our entrepreneur will have to go it alone, trying to make a business where currently there is none, going from zero to sixty as fast as s/he can, bootstrapping it all the while. And let’s say the entrepreneur has enough money stored up to finance the business and his/her lifestyle in a bare-bones, non-cushy way for two years, at which point the business will start generating some cash rather than burning it up. And let’s say that we know these things to be true with 100% certitude. OK?

Now let’s add a few particulars into the mix: the entrepreneur currently has a great benefit package, including health insurance, from a big, successful Silicon Valley business, which has been right handy because our entrepreneur was born with a heart defect that, through multiple surgeries as an infant and ongoing medications, has since then been well-managed, but ultimately might require further surgery. The doctors agree, though, that the entrepreneur will likely never again have a heart problem.

Lastly, let’s say our entrepreneur likes his/her job well enough, but also that what really sends the entrepreneur’s currently 100%-healthy heart a’soaring is the idea of building a business from the ground up.

So that’s the set-up: a business about to happen, and an entrepreneur who can make it happen in spite of having a long-dormant heart issue.

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So guess what?

Prior to New Year’s Day 2014, our entrepreneur probably would not have ejection-seated him or herself out of that job with the great benefit package — a real shame, that, yes? — and would have instead stayed put, biding time, pining for what might have been, all because of one thing, and one thing only: health insurance.

And that, my friend, is what we call job lock.

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Here are the job-lockin’ details.

If the entrepreneur had been very healthy, s/he could have left the old job and replaced the group health insurance from the old job with new insurance the entrepreneur could’ve bought through the individual health insurance market. That would’ve been easy to do, and, at least here in California, could even have been quite affordable due to high deductible health insurance plans designed to be coupled with Health Savings Accounts (also known as HSAs and having nothing to do with flex savings accounts and the like). For very healthy folks, these things have been the bee’s knees.

But because our entrepreneur had a pre-existing heart condition, pre-2014 health insurers in the individual health insurance market wouldn’t have touched him or her with a ten foot pole. So that route would’ve been a total no-go.

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That would’ve left the entrepreneur with two choices: either (a) go without health insurance or (b) pay to extend the health insurance s/he was getting from that great benefit package.

Going without health insurance is what tens of millions of people in the U.S. have been doing for years (47 million people in 2012) (that is not a typo: 47 million people were uninsured in 2012), largely because they could not afford health insurance or because they simply couldn’t get it due to pre-existing conditions. Sure, there were some uninsured folks who could have gotten health insurance who chose not to do so — stupid as that might have been — but there were also millions who had no choice but to go without.

Now hopefully this sorry state of affairs is changing as I write, because Obamacare’s chief raison d’etre is to provide heath insurance to those people who previously had no choice but to go without, but just a few months ago the no-choice-but-to-go-without conundrum was most definitely the reality in which we all lived, with some of us up to our necks in it every day, and others of us OK for now but constantly and forever exposed to the risk of being in it up to our necks every day sometime in our lives.

Our entrepreneur was not among those who had no choice but to go without health insurance; s/he had it as a group benefit of employment. For someone with a known heart condition, voluntarily choosing to leave that behind would’ve been simply crazy — suicidal even. So our entrepreneur would not have gone that route. So at this point in the analysis, our entrepreneur is indeed job locked.

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Instead, the best alternative for the entrepreneur would’ve been COBRA. COBRA is a federal law passed during Ronald Reagan’s presidency that, since then, has for all practical purposes required employers with 20 or more employees to allow departing employees to take their health insurance along with them when they leave — so long as the employee pays the full freight of the coverage.

Our entrepreneur would’ve been in a COBRA quandary, though, stemming from two facets of COBRA coverage: first, it typically extends the employer-provided health insurance for no more than 18 months following the employee leaving the employer’s employment, and, second, it typically costs a whole lot of money (usually considerably more than the high-deductible plan mentioned above).

In our entrepreneur’s case, then, even if we assume that the entrepreneur could’ve afforded the cost, s/he probably couldn’t’ve stomached the risk of not having any health insurance at all after 18 months. After all, just because entrepreneurs by definition are okay with cozying up to business risk, that doesn’t mean that an entrepreneur with a heart condition is okay with cozying up to the health risk of needing open heart surgery and not being able to get it done, does it?

Sure, if our entrepreneur’s business worked out and had employees before the 18-month mark, then the entrepreneur could’ve bought a group health insurance policy for the company and gotten health insurance for him or herself that way (group health insurance covers employees with pre-existing conditions but, by and large, pre-2014 individual health insurance was not available to people with pre-existing conditions). That would’ve allowed the entrepreneur to bid adieu to the COBRA insurance before it ran out, so the entrepreneur would’ve had continuous health insurance coverage. And many a healthy entrepreneur probably did just that.

But how many an unhealthy entrepreneur do you think would’ve actually taken that risk? And how about unhealthy entrepreneurs who were also parents? How many of those folks do you think would’ve taken that risk and imposed it on their children? And of those who did, how did well did they hold up to the stress? Why, the stress alone might’ve been enough to give our entrepreneur heart problems that otherwise wouldn’t’ve happened . . .

*  *  *

That’s one heck of a wacky, jerry-rigged, nonsensical, Kafkaesque system, eh?

I mean, why should an entrepreneur making a decision about starting a business have to learn all this heath insurance quagmire stuff in the first place? And why should two identical entrepreneurs — one with perfect health and the other with perfect health except for a long-ago heart problem at birth — be subject to such differing factors going into their entrepreneurial go/no-go decision?

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There’s good news on this front.

Since New Years Day 2014 and the (mostly) full blossoming of Obamacare, these issues are now much diminished. Our entrepreneur can now rest assured that s/he can buy health insurance in the individual market — we now call these state-by-state individual markets health insurance exchanges — and doing so will likely cost less than any COBRA coverage s/he might have been able to get, and, best of all, that heart thing that happened through no fault of his/her own will be totally irrelevant to the whole health insurance decision, because the exchanges take all comers.

So, entrepreneur, take wing and fly! You are no longer job-locked! Yeehah! Freedom!

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Short addendum addressing a common issue among the Geritol crowd:

Say you’re 60 and have health insurance through work, and that you have the same heart problem as the entrepreneur in the example above. Let’s also say that you’re 100% financially secure long-term for most anything, but not for an uninsured trip to the hospital for major heart surgery.

You know about Medicare: you know that it’ll kick in when you’re 65 and that it’ll provide great coverage for you any time you’re in the hospital. And you also know that, though you’re never happy with getting older, you do in fact look forward to turning 65 since that’s when you can rest easy about the cost of major heart surgery because that’s when you’ll have Medicare coverage for it.

You’d like to stop working right away — yesterday wouldn’t be soon enough — but due to your pre-existing condition you cannot get insurance in the individual market.

If it’s pre-2014, you, too, my friend, are job locked — and probably in a worse way than the entrepreneur (though at least your job-lock is time limited).

So like an employee in a hated job, counting the minutes before going home for the day, you find yourself counting the days until you’re old enough to be on the big single payer healthcare system we call Medicare.

But now that it’s 2014? Why, that means that you are job unlocked, my friend, and that it’s therefore high time for the next phase of your life! May it last many many decades. Enjoy!

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Even shorter addendum for progressives:

Job lock happens at all levels of society, but, in general, the lower on the socioeconomic ladder you go, typically the stronger the lock.

The entrepreneur example above deals with the upper end of the ladder, and so is quite far removed from the everyday concerns of most people. I use it here because (a) it is a local concern where I live and work, and (b) it well highlights what happens when job lock occurs, and does so in a way that speaks directly to something near and dear to those at the opposite side of the political spectrum from progressives, i.e., creative destruction, as trumpeted by Schumpeter, and which, through the sort of job-lock imprisonment nightmare I described above, had been, in the pre-Obamacare world, attenuated because ready, willing and able potential creative destroyers who just happened to be less-than-ideal customers for the Powers that Be within the individual health insurance market had to sit back on their hands, as mere passive observers, non-creatively non-destroying, as the creatively destroying entrepreneurial world passed them by like nobody’s business.



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