The big problem with this is that the short contract does not guarantee continuity of health insurance coverage, and this is a dealbreaker for a lot of folks. The pool of applicants who would accept these offers excludes the top-performing folks who have much better alternatives than contract-to-hire.

Developers who have great insurance coverage at their current job and require it at their next job aren't candidates for startups like mine. We don't have health insurance for employees - it's just too expensive for all but the very well-funded startups.

For this reason, experienced developers from other countries which have universal healthcare coverage and low cost of living, such as many Eastern European Countries, are very attractive to many startups.