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Small Businesses Adding Coverage Thanks to Health Care Reform

January 10, 2011

In the wake of Saturday's bloodbath in Tucson, House Majority Leader Eric Cantor (R-VA) announced that Wednesday's vote on the GOP bill to repeal health reform would be delayed. (That is altogether fitting, as Rep. Gabrielle Giffords received death threats and saw her office vandalized after her March 2010 vote for the Affordable Care Act.) But while the Republicans have postponed their quixotic effort to undo the law that will enable health insurance for 32 million Americans, evidence in support of the Democrats' 2010 reform continues to pour in.
Last week, the nonpartisan Congressional Budget Office (CBO) reported that the GOP's H.R. 2, the Repealing the Job-Killing Health Care Law Act, would not only lead to higher out of pocket costs, reduced benefits and saddle employers with higher premiums, but over the next 10 years would add $230 billion to the deficit. On Friday, Harvard economist David Cutler released a paper estimating that that repealing the health law could destroy 250,000 to 400,000 jobs annually over the next decade. And, as the Los Angeles Times reported, major insurers are reporting that thanks to the incentives in the Affordable Care Act, "a growing number of small businesses are signing up to give their workers health benefits."
Writing in that "Capitalist Tool" Forbes. David Ungar concluded, "Obamacare might just be working to bring health care to working Americans precisely as promised...Because the tax cut created in the new health care reform law providing small businesses with an incentive to give health benefits to employees is working." While 99% of firms with over 200 employees offer some kind of coverage, only three-quarters of those with 10 to 24 workers and half of companies with less than 10 employees do. And as the Los Angeles Times explained, the ACA's new tax credit for companies with fewer than 25 employees and moderate-to-low pay scales to help offset the cost of providing benefits is already having a significant impact:

Now some insurers are reporting significant jumps in coverage.
In the six months after the law was signed in March, UnitedHealth Group Inc., the country's largest insurer, added 75,000 new customers who work for companies with fewer than 50 employees. The Minnesota company called the increase notable but declined to reveal further details.
Coventry Health Care Inc., an insurer in Maryland that focuses on small businesses, signed contracts to cover 115,000 new workers in the first nine months of this year, an 8% jump.
In California, Warner Pacific Insurance Services in Westlake Village, a major servicer of insurance brokers, has seen business grow more than 10% this year, a company executive said.
And Blue Cross Blue Shield of Kansas City, the largest insurer in the Kansas City, Mo., area, is reporting a 58% jump in the number of small businesses buying insurance since April, the first full month after the legislation was signed into law.

As Ron Rowe of Blue Cross Blue Shield put it, "One of the biggest problems in the small-group market is affordability. We looked at the tax credit and said, 'This is perfect.'" He said that 38% of the businesses it is signing up had not offered health benefits before." Gary Claxton, who oversees an annual survey of employer health plans for the nonprofit Kaiser Family Foundation, summed up the promising results:

"We certainly did not expect to see this in this economy. It's surprising."

And a very welcome development. Welcome, that is, because as Kaiser and other analyses revealed, the deep Bush recession only accelerated the deterioration of employer-provided health care coverage.
This fall, the U.S. Census Bureau announced that the number of uninsured in America jumped to 50.7 million (16.7%) in 2009 from 46.3 million (15.4%) just the year before. But the Bush recession which began in December 2007 accounts for only a portion of that dramatic drop-off. A September 2010 analysis by the Economic Policy Institute found that employer-sponsored coverage plummeted from 68.3% of those under 65 years old in 2000 to just 58.9% in 2009. (A Thomson Reuters survey last year put the figure for 2009 at a stunning 54.6%.) It was only the expansion of government programs including SCHIP and Medicaid which offset the erosion of employer coverage over the last two years.
And that's just the beginning of the health care nightmare for employees that Republicans are determined to prolong. As the New York Times reported this fall, the Employer Health Benefits 2010 Annual Survey produced by the Kaiser Family Foundation found:

Since 2005, while wages have increased just 18 percent, workers' contributions to premiums have jumped 47 percent, almost twice as fast as the rise in the policy's overall cost.

But the one bright spot in the Kaiser survey was expanded coverage among small businesses. As the chart below shows, from 2009 to 2010 companies with 3 to 9 employees providing workers with insurance jumped by 13 points to 59%.

That finding was echoed by the not-for-profit advocacy group, Small Business Majority:

Small Business Majority commissioned a survey of 619 small business owners with fewer than 50 employees from Nov. 17-22, 2010. We wanted to gauge their opinions on two key provisions of the Patient Protection and Affordable Care Act: healthcare tax credits and insurance exchanges. For employers who don't offer health insurance, one-third said they are more likely to do so because of the tax credits, and 31% of employers who currently offer it said the tax credits will make them more likely to continue offering it. The credits, which are available now, allow businesses with fewer than 25 employees that have average annual wages under $50,000 to get a tax credit of up to 35% of their health insurance costs.
The numbers were nearly identical when respondents were asked if the exchange will make them more likely to provide benefits: 33% of respondents who don't provide insurance said the exchange would make them more likely to do so, and 31% who do provide insurance responded that the exchange would make them more likely to continuing providing it. The insurance exchanges are online marketplaces where small businesses and individuals can band together to buy insurance.

Evaluating those incentives to purchase insurance for her employees, Kiersten Firquain of Kansas City-based Bistro Kids responded, "We said, 'How could we not do this?'"
As for Eric Cantor, Americans will have to wait a few more days for him to regurgitate his debunked GOP talking point about "the job-killing healthcare law."


About

Jon Perr
Jon Perr is a technology marketing consultant and product strategist who writes about American politics and public policy.

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