The son of Indian immigrants and a 2001 graduate of the University of Pennsylvania's Wharton School, Khaund had always dreamed of starting his own software company. After six years at Microsoft and a year with an Internet start-up, he decided last fall that it was time to try.

His new company, Irynsoft, operates from a small office about a mile from his home in Walnut Creek, Calif.

Khaund, 37, said his wife's main hesitation was health coverage, especially because the couple had two young children and Khaund had required surgery last year to correct a heart-valve problem. But he assured her they could buy 18 months of coverage under his former employer's plan through COBRA.

That 1986 federal law has helped many early-stage entrepreneurs. But as Khaund soon learned, it can have a fatal flaw. His former employer sold out to a Swedish company, and its health-care plan was dissolved.

Though Khaund and his two daughters were initially rejected for private coverage, California state law at least enabled him to buy high-deductible insurance for about $19,200 a year. Appeals have since brought the total closer to $13,000.

But Khaund still worries whether he can go forward - especially after a former colleague, who was working nights and weekends for Irynsoft and was slated to be its chief operating officer, announced that he needed to keep his large-company job for insurance reasons. At 53 and with three children, he told Khaund that health coverage was the main obstacle.

"He could overcome the income concerns, cut back a little bit, and dip into savings," Khaund said. "But you can't cut back on health care."

Last month, Khaund wrote a letter to Obama describing his experience and said he worried that America's "gung-ho spirit" was being undermined, ironically, by those who "oppose universal health care because, they suggest, it's socialism."

"Should I just abandon my entrepreneurial dreams and work for a big company?" Khaund asked. "Can you imagine if Microsoft or Apple didn't get started because Bill Gates or Steve Jobs had a 'preexisting condition'?"

Cheryl Ann Wadlington faces similar concerns. She started her Old City firm, Evoluer Image Consultants, five years ago and wants to add staff. But the cost of health care has so far made that impossible.

Wadlington handles all administrative duties herself and has had to postpone plans to offer extra services to her individual and corporate clients in Philadelphia and New York. Instead, she relies on 10 people who work as independent contractors.

"I would love to be able to expand - I'd like to hire five people," Wadlington said. "In order to stay in business, you have to develop. Because of the health-care situation right now, we're unable to do that."

Studies for and against

Concern that employer-based health care discourages entrepreneurial risk has been around at least since the 1990s, when U.S. politicians last considered revamping the health insurance system. But hard evidence has been limited and conflicting.

One 1996 study, cowritten by Douglas Holtz-Eakin, later a top economic adviser to President George W. Bush and presidential candidate John McCain, found no statistically significant evidence that the employer-based system was impeding entrepreneurship.

At least two more recent studies have reached different conclusions. One as-yet-unpublished study, cowritten by Rand Corp. economist Susan Gates, calls the phenomenon "entrepreneurship lock."

Gates said in an interview that solving entrepreneurship lock could spur the U.S. economy enough to at least partly pay for the costs of subsidizing universal coverage. But she said it was impossible to predict the overall effect, in part because it was unclear whether the additional entrepreneurs would be better or worse than those already willing to take such leaps.

Gates said today's system might be discouraging the people best-suited to running businesses - prudent, thoughtful risk-takers - in favor of those convinced "they're never going to get sick and have to worry about their health."

"If you think that those are the people who are going to be deterred from going into entrepreneurship, and you also think that those are the people who should be starting their own businesses because they're not wild risk-takers or delusional, then the system might in fact be really crippling economic activity," Gates said.

To Gruber, the most important aspect of the entrepreneurship research may be its value in refuting arguments that offering any form of universal health care would harm the U.S. economy.