A shot in the arm: how today's health care reform can create tomorrow's entrepreneurs.

• Author: Gruber, Jonathan
• Position: SPECIAL REPORT ON ENTREPRENEURSHIP

This spring, some conservative and libertarian bloggers, aghast at Barack Obama's expansive government agenda, began calling on investors and entrepreneurs to protest by "going Galt"--that is, withdrawing their money and productive energies from the economy. The allusion is to John Gait, the hero in Ayn Rand's Atlas Shrugged, who leads America's creative entrepreneurs in a strike against a wealth-sapping collectivist establishment and brings the economy to its knees.

Of course, the fact that the economy is already on its knees might blunt the point of such a strike today. Still, entrepreneurs do play a vital role in the prosperity of this country. So it's worth asking how their behavior might be affected by Obama's policies. An excellent starting point is the biggest single initiative in President Obama's budget, a down payment toward universal health insurance coverage for all Americans. In this case at least, the protests are obviously misplaced. Universal health insurance, far from suppressing entrepreneurship, could be a boon to it.

The main reason for this is a phenomenon known as "job lock," a term coined during the last round of debate over universal health coverage in the early 1990s. Job lock refers to the fact that workers are often unwilling to leave a current job that provides health insurance for another position that might not, even if they would be more productive in that other position. This is because employer-provided insurance is traditionally the only reliable form of fairly priced private insurance coverage available in the U.S. The alternative is to purchase insurance in the nongroup market, where insurance prices and availability are typically not regulated, so insurance companies can drop individuals when they become ill or charge them exorbitant prices. As a result, individuals feel "locked" into less productive jobs.

Over the past fifteen years, dozens of studies have documented the detrimental impact that job lock has on the economy. These studies typically compare the mobility of workers who are at firms with insurance but do not have an alternative source of coverage (such as spousal insurance or COBRA continuation coverage) to those who do have an alternative source of coverage should they leave the firm. The studies find that mobility is much higher when workers do not have to fear losing coverage; job-to-job mobility is estimated to increase by as much as 25 percent when alternative group coverage is...