Percy Spencer’s Candy Bar: Health Care Reform and the Innovation Economy

June 24, 2014 by

Health Care Reform and InnovationYesterday, my scientist brother promised my eight-year-old son a new Hot Wheels car if he could research and explain how the microwave cooked his lunch.  My son vanished upstairs and came back triumphantly explaining how a scientist named Percy Spencer noticed the candy bar in his pocket melted after he stood next to an active radar set.  Mr. Spencer came back later with popcorn kernels in his pocket, and sure enough, they popped.  Spencer, inventor of the microwave oven, was born in Howland, Maine.  After his widowed mother left him to be raised by relatives, Spencer taught himself radio technology from books.

Percy Spencer was an innovator, and innovation was the gasoline that propelled the American economy through the 20th century.  Since the 1970s, innovation has slowed. And, the U.S. no longer leads the world in entrepreneurial ventures and start-ups – while new companies made up half of all American businesses in the early 1980s, now they represent only 35 percent.

What do Percy Spencer’s candy bar and the fate of the American start-up have to do with health reform?  A lot.  Health care costs, now 18 percent of GDP, have been driving ever-higher health insurance premiums.  By 2008, some workers found themselves tied to their jobs just for the health insurance, a critical benefit.  They did not dare strike out on their own entrepreneurial venture, for fear they would lose their health coverage.  And this was a reasonable fear – one in four entrepreneurs went without health insurance in 2012.  This phenomenon, where people stay in jobs to keep health benefits they could not otherwise afford, is called “job lock.”

A recent Forbes piece, “Four Reasons the ACA is a Boon to Entrepreneurs,” explains what it means for the economy now that private insurers cannot refuse to cover preexisting conditions and people without access to employer health coverage can buy insurance on the ACA marketplace – often subsidized to make monthly premiums affordable:

  • The “Job Lock” Phenomenon is Broken: 

People with good ideas and imitative can go into business for themselves without fearing medical bankruptcy, since quality, affordable health insurance coverage is available on the exchange.  One study also found that young people, who now can stay on their parents’ coverage until age 26, are more than twice as likely to start their own businesses as before.

  • Start-ups Can Attract Better Talent:

Small, new companies once had difficulty competing with larger, more established companies offering better benefits to new hires.  Now with insurance available through the marketplace, potential hires  inspired by a new company’s promise might be more comfortable taking the leap.

  • Women Might Start More Businesses

The majority of entrepreneurs are men – and even though more women than ever are graduating from college or pursuing science, technology, engineering, and math (STEM) degrees, male entrepreneurs are more overrepresented than ever.  This could be because young women are less willing to go without health insurance to start a business.  However, the study of young workers covered by their parents insurance cited earlier also found young women driving much of the increases in entrepreneurship.

  • The ACA Offers Affordable Options for Employers, Too

While premiums for some companies may increase due to the more comprehensive Essential Health Benefits mandated by health reform – including maternity care and cancer screening – premiums for 35 percent of businesses will go down.  And, for small businesses with only a few employees, the Small Business Health Options Program (SHOP) will provide a federal tax credit worth 50% of an employer’s contribution toward premiums.  Other companies can direct employees to buy insurance through the exchange and reimburse them.

My son won a Hot Wheels car yesterday, but it felt bittersweet for me.   A recent Portland Press Herald article described how a Ball State University group gave Maine a “C” in manufacturing, citing high benefit costs and low rates of innovation..  Maine gave the world Percy Spencer, and Hiram Maxim, inventor of the Maxim machine gun.  Frank Crowe, who built Hoover Dam, was a UMaine alumnus.

The Ball State study gave Maine high marks in “human capital” as a strength.   Perhaps as health reform dissolves “job lock” and frees people to pursue their highest goals, Maine’s innovators can shine again.

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