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Start Your Business Entrepreneurs

Parents' Health Insurance a Lifeline for Young Entrepreneurs


While many contend the Affordable Care Act is bad for businesses, one of the law's components is making it easier for more than a million young potential entrepreneurs to start ventures of their own.

Under the act that became law in March 2010, health insurance providers now must continue to extend coverage to the children of their subscribers until the children reach the age of 26.

Before the law took effect this year, some young adults say, the prospect of hefty health insurance bills (or of living without coverage) deterred them from starting businesses. Removing the cost of insurance from these would-be business owners' financial obligations freed capital to invest in businesses and reduce the risk of entrepreneurship.

Matt Korostoff, co-founder of the Web design and development firm Harvey Plum Creative, said the thought of living without health insurance had kept him in a job he'd otherwise have left.

"I can't quit my job and hope I'll be healthy," the 24-year-old said.

But in November, two months before the Affordable Care Act took effect, Korostoff left his job to start his company.

"There is no doubt that my company today would not exist if it weren't for the change in the health care law," said Korostoff who is now on his parents' insurance policy.

The U.S. Department of Health and Human Services estimates that 1.2 million young adults are getting extended coverage through the act's provision. The department, on its website, also estimates the provision will increase the average family premium by 1 percent.

Deirdra Smith, an entrepreneur who sells travel memberships through the network marketing company World Ventures, also said the Affordable Care Act played a role in her decision to strike out on her own.

"Being able to be on my parents' health insurance was very helpful financially because I didn't have to worry about paying $200 to $300 per month for a separate health plan," she said, adding that she used the money to pay for marketing tools and training.

Since she began selling vacation memberships, Smith has begun working part-time as a trainer for the Young Entrepreneurs Network, a group that encourages individuals ages 18 to 35 to engage in network marketing.

The Health and Human Services website observes that young adults are less likely than older or younger Americans to have health insurance because of the jobs they hold.

"As young adults transition into the job market, they often have entry-level jobs, part-time jobs or jobs in small businesses and other employment that typically comes without employer-sponsored health insurance ," the HHS states.

And, according to the department, one in six young adults has a chronic disease.

Korostoff said that while the provision helped him co-found Harvey Plum Creative, he realizes the financial relief it offers is temporary. He said he has wondered what will happen if he ages out of his parents' insurance coverage before his business builds a revenue stream sufficient to provide him with his own insurance .

"I hope it doesn't come to that, but most people don't get to be self-employed," Korostoff said.