Why the Current Politics of Healthcare Reform are Bad for Silicon Valley

While I avoid going political in my blog posts, some recent experiences became entwined with my thinking about the debate on healthcare reform, and a marketing-relevant post was born.

While you might not know it if you just listened to the current debate in Congress, most Americans support a government-run, public medical program. Over the weekend, the New York Times/CBS News released a study that showing 72% of Americans support a government-run, public program for medical coverage. I mentioned that to one of my colleagues during lunch yesterday, and his expression went from surprise to concern / fear of government management and a list of talking points with seeds in the FUD arguments being used to keep any sort of national healthcare program from being implemented.

But rather than going down through the long path of the debate over public healthcare, I wanted to take a quick moment to focus on the costs and potential costs for businesses -- but I want to approach it from more of a Silicon Valley point of view. For many Silicon Valley companies, a significant portion of their workforce are contractors. Part of the reason behind this is that, between health insurance benefits and the freedom to flexibly expand and reduce their workforce, it's easier and cheaper for them. As a result, there are a lot of contract jobs here in Silicon Valley. What these all have in common is that they actually pay more in salary than permanent positions, because once you take the cost of health insurance and benefits out of the picture (offload it on the individual), they can afford to pay more.

Nobody WANTS to NOT have health insurance
So if you're a worker here in the valley, the salaries and the opportunities in those contract positions look pretty good, but if you're permanently employed, moving to a contract position can be a serious gamble. If, at the end of your contract period, there is a gap in your employment status, the health insurance companies can use that as a window to begin denying you coverage based on "pre-existing conditions". As a result, the people who are more likely to take contract positions are more likely desperate, unemployed.

Transforming the Entrepreneurial Market
Now imagine a system that freed and employees from having to worry about healthcare coverage costs. Here in Silicon Valley, a company that was ramping to build there innovative product could afford to pull in best and brightest, secure a commitment from them for long enough to complete the project, then release them back into the talent pool with risking any sort of organizational integrity. And for the employees / contractors / talent, you now have more flexibility to take risk, secure in the knowledge that if you take a gamble on an organization like an emerging start-up, your exposure is significantly reduced.

One frequent counter to this type of arguement (yet another FUD) is that this type of program will wind up costing businesses. It's ironic though, when you think about it. Take Wal-Mart for example. It's widely recognized that Wal-Mart goes to great lengths to ensure that they don't have to provide health benefits to most of their employees. If it were a profit for them in providing health benefits, there employees would have them. Instead, they push that cost out, making businesses that pay those costs look like suckers.

Imagine leveling that playing field...
Remember when Internet investment took off? Call it the dot.com bubble if you want, but one aspect of that period was a tremendous amount of investment and growth. What if one of the factors that contributed to the growth was the competitive landscape -- the potential that some small start-up company might grow up and compete with AT&T. Or Microsoft. Or IBM. Or Intel. That some company might grow up to be Cisco. Or Google. Or Yahoo (well, that one didn't quite work out the way that you might have expected...) What if that potential was the thing that brought in investment? What if...

Sadly, Washington is more likely to work predictably, so my expectation is that we're unlikely to get any real reform. Is real change the audacity of hope?