Nonprofit, independent journalism. Supported by readers.


The uninsured entrepreneur

Founders are often reticent to talk health insurance, but the consequences of living without it can be dire. What will it take to start the conversation?

Chef Justin Sutherland’s freak boating accident on July 3 made national news. The timing of it seemed particularly heartbreaking, hitting right as his red-hot career was reaching new heights. He had restaurant openings planned for Minneapolis and Portland, as well as a cookbook about to debut. That’s on top of his TV show, Fast Foodies, a streetwear brand, philanthropic projects, and ongoing operations of several Twin Cities restaurants including Handsome Hog. His friends and family announced that he would have to take time off to recover from multiple surgeries. They also started a GoFundMe to cover his mounting medical bills. And with that, the shock over the accident quickly turned to shock of another kind: How is it possible that a famous chef at the top of his game didn’t have health insurance? 

But ask around—every entrepreneur has a story about health insurance, and few are surprised that even a rising star like Sutherland was rolling the dice and going without insurance as he built his business. Serial entrepreneur Brad Fletcher remembers that gamble. “I didn’t even think about it in my early 20s,” says the Eagan resident, who is now chief strategy officer with California-based health insurance platform Venteur.

Often deemed a private matter, health insurance is not openly talked about in entrepreneurial circles. Though entrepreneurs are comfortable sharing balance sheets, revenue projections, and head counts with investors, they’re less forthcoming when it comes to health insurance. And venture capital firms generally don’t require the companies they’re funding to provide health insurance to employees.

“It’s not discussed,” says Reed Robinson, founder and partner of Minneapolis-based Groove Capital, which targets its investments to early-stage companies. “That might be because founders have that figured out or they’re not interested in having that conversation.”

Article continues after advertisement

What’s more, many young startups tend to inhabit a legal gray area. Under the Affordable Care Act, any business with 50 or more full-time employees is required to offer “affordable” health insurance to its workers. As of 2022, the federal government defines “affordable” as a plan with premiums that cost no more than 9.6% of an employee’s total monthly household income, including a partner’s earnings. Those that don’t offer adequate health plans face penalties to the tune of thousands of dollars per employee. 

But no such requirement exists for companies with fewer than 50 employees—which leaves the decision up to the founders themselves. If you’re a “solopreneur” with a great idea but no spouse or family connections to speak of, should you pursue a potentially costly health plan or take a chance with no coverage?

ACA impacts

Enacted in 2010, the Affordable Care Act has significantly cut the number of people without insurance in the United States. In Minnesota, that figure has been on the decline for years. According to an annual health survey conducted by the state’s health department, the number of uninsured Minnesotans has fallen from a peak of around 9% in 2007 to a record low of 4% in 2021. That makes chef Sutherland’s case something of a rarity among Minnesotans.

Most Minnesotans—about 52%—are covered under a group plan, typically through their employers. Another 41% are covered through public plans like Medicare and Medicaid, while about 2.8% use individual plans through MNsure, the state’s health insurance exchange established under the ACA. The remaining 4% are uninsured.

An idea known as “entrepreneurship lock” implies that some would-be entrepreneurs are less likely to start a business because they worry about a lack of health coverage. Whether the ACA entirely removed those fears is up for debate. “The ACA did change the ballgame a bit by providing people with a feasible option for accessing health care plans if not employed full time, as well as providing access to parental insurance plans for young people through age 26,” says Susan Gates, a senior economist with the Rand Corp. who has studied the impacts of health insurance on entrepreneurship.

Even with more robust options out there, some entrepreneurs are still skittish about taking the leap. Consider Michelle Maryns, founder and CEO of Minneapolis software startup WeSparkle. “I had always been interested in starting a business, but I’ve always had that normal 9-to-5 job with employer-based health care,” Maryns says. “A lot of times, I think that’s what is preventing a lot of creativity and innovation from being realized in our society. … It was scary for me because a lot of my family depended on me and got their health care though my work.”

She started doing the research and eventually landed on a plan with MNsure. But she looked into plenty of other options along the way, including health plans through an alumni group and a freelancers union. Now, she’s happy to share what she’s learned with fellow entrepreneurs if they come to her with questions.

Balancing act

Health insurance is, of course, just one of the many business expenses entrepreneurs have to consider. There’s also IT, HR, accounting, and myriad other pressing concerns. “When you’re trying to keep your business alive, insurance can be the thing you put on the back burner,” says Alex West Steinman, co-founder of Minneapolis-based coworking company The Coven. “What I think is really challenging for entrepreneurs is we’re dealing with a million things we don’t know how to do. Entrepreneurship is a series of unknowns and fearful leaps into spaces we haven’t quite figured out.”

Article continues after advertisement

For Steinman, health insurance has been a topic of concern for years. She says it was among the first things she hoped to address when she and three co-founders launched The Coven in 2018. That’s why she decided to partner with Minneapolis-based startup Nice Healthcare late last year to provide a primary care option for Coven members. For $30 a month, the coworking company’s members can access primary care doctors through Nice.

Steinman acknowledges that it’s not a substitute for standard health insurance—the service doesn’t cover hospitalizations, surgeries, or other more intensive procedures. But she hopes it will be one small step toward “democratizing” health care. For time-strapped entrepreneurs and freelancers, the service has been helpful, Steinman says.

Some have told her it’s helped them out in a pinch—if they were seeking quick assistance finding a therapist or a quick remedy for a sinus infection, for instance. “If [members] don’t have insurance, this is a great support to get some sort of health care quickly,” she says.

Today, The Coven has about 1,000 members between its Minneapolis and St. Paul locations. The company provides full health insurance for its eight full-time employees, but all workers — including part-time employees and contractors — can sign up for the Nice offering for free. Steinman says she’s hopeful that health insurance will become a more common subject for discussion.

“I think people talk about health insurance when they need it,” she says. “It’s not a topic that we discuss like venture capital, or like funding, but maybe we should. … As a startup and a founder, it can be really challenging to navigate the health care system, not only for your employees, but even just for yourself.”

Minneapolis entrepreneur Hayley Matthews-Jones, who runs the Minneapolis Craft Market and the Minneapolis Vintage Market, says the American health care system is bewildering, especially for someone coming from her native United Kingdom, which has universal health care. “It’s unnecessarily complex,” she says. Matthews-Jones and her husband have bounced between each other’s health plans to avoid gaps in coverage. “The idea of being sick and having to worry about how you’re going to pay for it is horrific,” she says.

When she was browsing health insurance options, she says she often “couldn’t make heads or tails of documents. I didn’t understand the policy language.”

The public option

Nate Clark, CEO of MNsure, has a simple message for entrepreneurs who are feeling overwhelmed at the prospect of buying health insurance: Reach out.

Having worked at two startups in his career, Clark understands why leaders at younger companies avoid talking about health insurance. During his time in the startup world, Clark and his colleagues poured countless extra hours into their jobs, but health insurance continually fell by the wayside, he says. “We focused on everything except health insurance,” he notes. “Let me be the first to say that understanding your health insurance options is really complicated.”

Article continues after advertisement

MNsure’s answer to that? About 2,000 “assisters” around the state to help people enroll. They’re essentially insurance brokers who explain coverage options. To be sure, there are limits to MNsure’s offerings: The agency’s plans are tailored to individuals, not employers. That means it’s not an option for startups that are rapidly hiring.

As Clark sees it, entrepreneurs can be just one subset of the overall uninsured market. “We do outreach targeting all folks who need access to health insurance,” he says.

Shelisa Demuth, executive director of Minnesota startup advocacy group Beta, says MNsure’s platform was fairly simple to navigate in the earlier days of her entrepreneurial journey. Before she took the top spot at Beta, she ran her own public relations agency known as Laurel Development. “People at the state have been really helpful. It’s not like that everywhere,” says Demuth, who navigated health insurance exchanges in states along the East Coast.

Like other startup boosters in town, Demuth says she doesn’t often hear concerns about health insurance from the entrepreneurs she works with, unless it’s an emergency. Those who participate in Beta’s programs, for instance, must be working on their startups full time. That means they’ve likely already settled the issue of finding a health plan before they arrive at Beta, she says. 

Still, she’s well aware of the health-related challenges that entrepreneurs may face. She’s heard from a founder who had to weigh putting a fast-growing startup on hold to fund a relative’s health care costs related to a recent cancer diagnosis.

“I, too, have been in a similar situation as a founder with and without health care before generating enough revenue to feel confident in providing benefits to myself and savings enough to cover medical bills,” Demuth says.

Other options?

MNsure is just one resource for individuals. Most insurance companies, including UnitedHealth Group and Cigna, offer short-term plans to help fill gaps in coverage. 

A few startups have entered the space as brokers, too. There’s San Francisco health insurance startup Venteur, which helps entrepreneurs find insurance for themselves or their employees. Dallas-based Take Command Health is another option.

Venteur combs through options available on public exchanges, but it also cuts deals with insurers to provide a few “off-exchange” options, Fletcher says.

Article continues after advertisement

“Instead of offering a traditional group plan for employers, we offer each person their own individual plan. Companies pick how much insurance they want to offer each person,” Fletcher says. The platform uses artificial intelligence to tailor the most cost-effective option for an employee, he adds.

Regardless of how business owners insure themselves or their employees, startup advocates agree that some form of coverage is an imperative, and more discussion about how to get it is necessary.

“Justin Sutherland’s story is so important for us to share,” says The Coven’s Steinman, “because so many entrepreneurs could find themselves in the same situation.”