If you are a solo-preneur, you walk a tightrope with no safety net, except the one you build yourself.
That is because as an independent, you are engaging in capitalism and free enterprise in its purist form. No Unemployment Insurance for you if the economy's downturn shrinks your paying customer base. And no TARP money for you either--unlike AIG and Goldman Sachs, you're not big enough and you don't have a strong lobby working on your behalf. That's right, no corporate welfare for you.
I wonder if the CEOs of Citibank and Goldman Sachs would be equally as courageous.
But one of the dicier aspects of your decision to go it solo is that you are thrust into the individual health insurance market. That is where you go head-to-head with an insurance behemoth (the health insurance industry had undergone a great deal of consolidation so the companies left standing are by and large behemoths) to negotiate your insurance coverage.
I exaggerate here. The reality is that the insurance company probes your private health information and after subjecting you to that indignity it arbitrarily decides if they will deign to offer you coverage. Insurers will say that they have to maintain stringent underwriting guidelines because they must guard against "moral hazard."
Moral hazard takes place when a buyer of insurance stacks the deck in his favor., ie., waiting to buy flood insurance just before the hurricane hits is an example of moral hazard. Another example is waiting until you are sick to buy health insurance.
Insurance companies assume that most buyers of individual health insurance are engaging in moral hazard, because the young, healthy 20 somethings would not squander their paltry dollars on a product that would have a low likelihood of paying out.
Insurance, ideally, is the spreading of risk. If a hundred homeowners each put a $1,000 into a pot, they will have enough money to pay one homeowner for the cost of his $100,000 house if it burned down to the ground.
The problem is that health care is so expensive in this country, if you do not have good insurance, not only can you can easily go bankrupt if you develop a catastrophic health condition as many, many Americans have, often it is difficult to get into the door to be seen by a medical professional.
The upshot is that the offerings available to solo-preneurs are scarce and expensive. The result is that we have 47 million uninsured people, many of them solo-preneurs. And of those who do have insurance, many have big holes in coverage.
Elizabeth Warren estimated that approximately 50% of bankruptcies were caused by medical costs and of those 50%, 75% had insurance at the onset of their illness. The human cost is horrendous, see last night's episode of Bill Moyer's Journal.
Certainly I understand an insurance company's reluctance to take on a policyholder who would be likely to run up hundreds of thousands of dollars in medical bills as the people profiled in Bill Moyer's show. Insurance companies are a profit making enterprise and they owe a duty to their investors to maximize profit.
But is it humane to reject coverage for someone who is or is likely to become sick, in effect barring them from the healthcare system? The larger issue, in my opinion, is whether healthcare is to e regarded as a for-profit commodity or as part of the basic social contract as it is in the rest of the first world.
