Health Insurers Refuse To Make Small-Employer Concessions

By Marc Tracy

Finally, it looks like the rest of the country is beginning to pay attention to the myriad special problems faced by small businesses in the realm of health care. Due to economies of scale, it tends to be more expensive for small businesses to offer insurance to their employees than for big companies; and if small businesses simply refuse to offer coverage, then, given the way our health care system is dominated by employer benefits, the best employees are likely to go work for a big company. Really, it is no wonder that, statistically, newer and smaller firms are less likely to offer health insurance than big and established ones. And no wonder as many as half of the country's over 40 million uninsured are either self-employed or employed by a small business.

Meanwhile, as moves towards true health-care reform begin in earnest, many have spoken up for reform that would specifically address this imbalance (here's our take on the most prominent of these efforts, "SHOP", on which more in a little).

On the other hand, as the New York Times reports today, there has been subsequent pushback from health insurance companies.

Nearly everyone the Times talks to point out that these companies have agreed to give up major ground as far as selling insurance to individuals is concerned--notably, they have agreed to sell policies to people with pre-existing conditions and to keep price independent of relative sickness or health. But these same companies are refusing to budge when it comes to bringing down costs for small-business employers...which just so happen to represent "one of the most profitable segments of health insurance."

Indeed, the key to understanding why small businesses need help here is to recognize that the challenges they face in providing insurance to their employees are quite similar to the challenges individuals without employment benefits face in providing insurance to themselves. "Unlike large companies, which tend to self-insure and can spread medical risks over a large work force, small businesses typically rely on an insurer to help assume that risk," the article points out--and the same, obviously, goes for individuals.

A spokesperson for the National Federation of Independent Business, the top small-business lobbying organization, and one that frequently leans rightward in the policies it advocates, puts it best: “For us, there is a huge issue in not only addressing just one of the broken markets, but two of those broken markets,” the spokesperson said. She is referring to individuals and to small-business employers.

The difference, of course, is that the companies have agreed to some fixes for individuals; no parallel concession for small businesses has been made. The Times

So what would represent a fix? We'd have to point to SHOP (Small Business Health Options Program), which was introduced into the Senate a couple weeks ago with three bipartisan sponsors and the backing of both progressive and pro-business interest groups. You should definitely read our take on it from when it first came out.