State Subsidy for Small Business Health Care Coverage

Rationale

The majority of uninsured people in the United States are workers and their families. For these families, despite fulfilling the social contract by going to work, the lack of affordable, employer-based health coverage means that one serious illness or disease could result in financial hardship and put any accumulated wealth in jeopardy. A majority of these uninsured workers and their families are low-income earners, and many work for smaller firms. Yet, only 55% of firms with three to 10 employees offered health care coverage in 1999 (compared with 90% of firms with 50 or more employees). Because of their size, small firms face a number of particular barriers to providing health insurance for their employees, such as higher premiums than those paid by large firms and narrow profit margins. In order to decrease the number of uninsured working families, a number of states have experimented with new policies designed to encourage small businesses to offer health insurance to their employees. These include direct subsidies using state or Health Insurance Premium Payment funds to reduce the cost of employer- provided coverage, tax credits for employers newly offering coverage, and strategies to maintain the affordability of coverage (e.g., reinsuring participating plans against high losses or loosening certain state-mandated benefits).

About Measure

States get credit for using state or federal funds other than Medicaid and SCHIP to encourage employers to provide health insurance for low-income workers.

Source

Silow-Carroll, S., Anthony, S.E., & Meyer, J.A. (November 2000). State and local initiatives to enhance health coverage for the working uninsured. New York, NY: The Commonwealth Fund.