Governor looks to ease burden small businesses pay to cover workers
By Kay Lazar, Globe Staff | September 11, 2009
President Obama’s vision for overhauling the nation’s health care looks remarkably like the landmark plan Massachusetts launched three years ago, but in one striking difference he would exempt many small businesses from having to contribute to workers’ insurance coverage.
For those small businesses that do provide insurance, Obama’s plan would offer tax credits to offset costs and would create an exchange where employers couldbuy coverage at competitive prices – two key things Massachusetts has not done.
The differences underscore a sore spot for many small business owners in Massachusetts, who have been lobbying for relief under the state’s law, saying insurance has become unaffordable.
Obama said in his speech to the nation Wednesday night that his overhaul would exempt 95 percent of small businesses – those with fewer than 50 workers – from having to pay for workers’ health insurance.
But in Massachusetts’ overhaul, businesses with the equivalent of 11 or more full-time workers must offer coverage or pay a penalty – a requirement that has chafed at many small business owners who say they lack the buying clout of big businesses to bargain for cheaper insurance rates. Small business owners say they have had to shoulder double digit annual increases in their premiums in recent years, typically higher than the 7 percent to 9 percent increases larger businesses have faced.
A 1996 state law prohibits small businesses from negotiating as a group.
Yesterday, Governor Deval Patrick said publicly for the first time that he backs efforts to change that law.
“That [law] is wrong in my view, and it needs to be changed,’’ Patrick said in a conference call with reporters.
Pending legislation would allow businesses with 50 or fewer employees to form a nonprofit consortium to bargain for cheaper rates.
Last month, Patrick instructed three of his chief advisers to review that proposal, along with other suggestions, and come up with recommendations by Labor Day to ease the health insurance burden on small businesses.
The panel – which includes Administration and Finance secretary Leslie Kirwan, Health and Human Services secretary Dr. JudyAnn Bigby, and Housing and Economic Development secretary Gregor Bialecki – has yet to issue its recommendations.
Yesterday, Kofi Jones, an administration spokeswoman, said it is a “top priority.’’
“Secretary Bialecki is finalizing his recommendations for the governor,’’ Jones said. “We expect something in the coming weeks.’’
The Census Bureau reported yesterday that Massachusetts has the lowest percentage of uninsured in the nation, so it is not surprising that many provisions of Obama’s plan are similar to Massachusetts law: Obama’s would require nearly everyone to purchase coverage or pay a penalty, would offer “hardship exemptions’’ for those deemed too poor, and would prohibit insurers from refusing to cover people with preexisting conditions. It also would subsidize insurance for low-income people.
The requirement that most people would have to buy insurance could spur many small businesses to offer coverage, even if they don’t have to under Obama’s plan, several top businesses leaders said yesterday.
“The reality is that your employees have to have coverage, and you are going to have to make something available for them if you want to retain those employees,’’ said Jon Hurst, president of the Retailers Association of Massachusetts, which represents many small businesses.
“Obama drawing the line at 50 is more a political message than reality,’’ Hurst said.
A survey by the state’s Division of Health Care Finance and Policy in 2007, just as the Massachusetts health insurance overhaul was getting underway, showed that 88 percent of businesses with 11 to 50 workers already offered health insurance, but a smaller proportion of small businesses nationwide offer coverage.
“Nationwide, if you did 11 like we did, you would impact many more employers who don’t already offer health insurance and therefore it would make it politically more difficult,’’ said Richard Lord, a board member of the Connector Authority, the state agency that oversees the 2006 insurance law and chief executive of the Associated Industries of Massachusetts, the largest business group in the state.
After passage of the 2006 law, some feared that many businesses would drop insurance coverage altogether, because the penalties in the law are cheaper than providing coverage, and instead encourage their low-paid workers to enroll in the state’s taxpayer-subsidized insurance program.
But a new study indicates that has not happened.
Employer-based health insurance in Massachusetts continued to gain ground in 2008, according to the analysis by the Urban Institute, which was funded by the Blue Cross Blue Shield of Massachusetts Foundation. The analysis found that more than 70 percent of all adults under age 65 in Massachusetts have insurance through their employers, a gain of nearly 5 percent since the 2006 law went into effect.
“We have had an increase in employer provided coverage here, despite the fact that the penalty here is small,’’ said Brian Rosman, research director at Health Care for All, a large consumer group. The penalty on employers is $295 per year for each worker not covered.
Kay Lazar can be reached at firstname.lastname@example.org.