United States Small Business Administration
Office of Advocacy
RS Number 126
PURPOSE
Small businesses face substantial cost and other barriers
in obtaining health insurance coverage for their
employees. An analysis of data from the Current
Population Survey, performed by the Bureau of the Census,
indicates that 28 percent of workers aged 18-64 who are
employed by firms with fewer than 25 employees had no
health insurance coverage in 1989, compared with 8
percent for firms with 1,000 or more employees. This
study was commissioned to identify and examine strategies
that are proving successful in increasing health care
coverage for small business employees.
SCOPE AND METHODOLOGY
The study identified and reviewed the characteristics of
27 programs that have been successful or show promise of
success in expanding health insurance coverage for small
firms. Case studies were conducted for each of these
programs covering benefit structure and premiums,
administration and marketing, enrollment, and lessons
learned. The programs reviewed include those funded by
the Robert Wood Johnson Foundation as part of its Health
Care for the Uninsured Program; state legislative
initiatives; products specifically designed for uninsured
small businesses, developed by Blue Cross and Blue Shield
plans; programs implemented through trade associations;
and model legislation to improve access, developed by the
National Association of Insurance Commissioners.
Program strategies include improving the information
available to employers regarding insurance policies,
eliminating mandated benefits requirements for policies
sold to small businesses, using significant cost sharing
and provider discounts to reduce premium rates, adopting
group purchasing arrangements, using managed care
programs, restructuring insurance regulations relating to
underwriting practices, and other initiatives.
HIGHLIGHTS
High cost was consistently identified by program
developers as the most important reason why small firms
do not provide health insurance for their employees. Even
when the higher marketing and administrative costs
associated with providing coverage for small businesses
were eliminated--as in many of the case studies--the
researchers found that many small businesses that did not
already have health insurance did not purchase coverage.
The case studies suggest that significant insurance
premium subsidies may be required to lower premiums
enough for small businesses currently without insurance
to provide coverage for their employees.
Successful program initiatives for improving small
business access to health care had the following
characteristics in common:
* attractive benefit designs that were similar to a
traditional benefit plan,
* managed care and lower than prevailing provider
rates,
* aggressive and creative marketing,
* substantial community support, and
* relatively low employer premium rates.
The review of private and public sector initiatives to
improve small business access to health insurance
coverage has identified a number of programs that work.
These programs have achieved significant enrollment among
firms that previously did not provide insurance coverage
for their employees. The descriptions of the program
features in the body of the report and in the case
studies can help in designing expanded initiatives at the
local, state, and possibly national levels to facilitate
increased insurance coverage among small businesses.
For more information, contact Advocacy's Office of
Information at (202) 205-6531.
Ordering Information
The complete report is available from:
National Technical Information Service
U.S. Department of Commerce
5285 Port Royal Road
Springfield, VA 22161
(800) 553-6847
Order number: PB92-183607
Cost: Pending
*Last Modified 6-11-01