American companies can hire and fire workers with relative ease, one reason that the U.S. economy has been a world leader for decades. Tumultuous and painful at times, the trade-off is an economy that's more responsive and open to change — and faster growth.
Workers are free to move around, too, but for too many, health insurance has become a ball and chain. If they have a family or a pre-existing condition, it can be too risky to leave a big employer and join a small company, where coverage could be dropped at any time.
Health reform, signed into law by President Barack Obama on Tuesday, will change that as key improvements are phased in over the next four years.
Most of the debate has focused on the uninsured, consumer protections, rising health costs and the role of government. Less appreciated is the impact on the labor market, both for small businesses and workers.
By guaranteeing access to affordable insurance, individuals will eventually gain as much flexibility as their employers, and that could usher in a new era of risk taking and innovation.
More people will be able to take a flier on a startup or join a small business. Entrepreneurs will find it easier to recruit talent, especially older workers.
Job switching isn't top-of-mind at the moment, during a deep recession, but ultimately this new mobility will translate into a more dynamic economy.
One study reported that 1.6 million workers are "locked" into their jobs because they can't give up the benefits. Worries about health insurance reduce job mobility by as much as 50 percent, studies show, squashing opportunity and hurting efficiency.
Eliminate that friction, and guess who wins? Individuals and small businesses, which have ceded much of the labor market advantage to large employers that can afford to run the benefits gantlet.
"This is a big win for small businesses because they can be judged on the quality of their companies, not their health insurance," says John Arensmeyer, CEO of Small Business Majority, a nonprofit advocacy group.
Health reform is also likely to lower prices, or at least the pace of increases, for small companies. On average, small companies pay 18 percent more for the same coverage because they have less leverage with insurers. Many small players in Texas pay two to three times as much, and they may be priced out of the market if a worker gets seriously ill.
By 2014, state and regional insurance exchanges will be in place, competing for millions of customers from small companies and the individual market. No one will be denied coverage, and rates are set within a narrower band. Over the next decade, changes from reform, including the exchanges, could save small businesses up to $855 billion, according to a study by Jonathan Gruber at MIT.
Companies with fewer than 25 workers can get tax credits of up to 35 percent this year if they pay for half their employees' insurance. A high-risk insurance pool is also being created as a bridge to 2014.
And people could switch as early as mid-2012 and use COBRA coverage to fill the gap. That federal law lets workers maintain their current insurance, at their corporate rate, for up to 18 months after leaving their company.
Large employers used to be known for stable work environments and generous pensions, and workers joked about the "golden handcuffs" that bound them. That's rare today except in government work. But health insurance remains a point of differentiation because big companies have the resources to manage it aggressively.
Ninety-six percent of companies with at least 51 employees offer health insurance, and the vast majority pay some portion of the premiums. In Texas, fewer than one-third of small companies offer any health insurance.
Most say it's too expensive, and prices keep rising. In a survey last year by the Texas Department of Insurance, only 2 percent of small employers said they would definitely provide coverage in the next three years. That compares with 81 percent that said they definitely or probably would not.
It's tough to compete for skilled workers when there's little prospect of getting insurance. Health reform levels the playing field.
"The scary part of health insurance is the big increases every year," says Rolly Hillas, who owns Hillas Packaging in Fort Worth.
His company faced a 20-percent increase this year, so it switched providers and went with a $1,000 deductible. Hillas pays the full cost of health insurance for his 15 employees because he believes it's the right thing to do. It has helped keep employee turnover to a minimum.
Hillas will qualify for tax credits this year, but he's more excited about the exchanges coming in 2014, and not only because he may get a better deal. "Every minute that I have to spend studying health insurance is less time to do my real work," he says.
Millions of others can look forward to the same prospect. Rather than fret about health coverage, they'll be able to focus on what they do best.