Health coverage expands among small businesses

Tribune NewspapersJanuary 9, 2011 

Major insurers around the country are reporting that a growing number of small businesses are signing up to give their workers health benefits, a sign of potential progress for the nation's battered health care system.

The increase, although not universal, has brought new security to thousands of workers, many of whom did not have insurance or were at risk of losing it.

An important selling point has been a tax credit that the nation's new health care law provides to companies with fewer than 25 employees and moderate-to-low pay scales to help offset the cost of providing benefits. The tax break is one of the few provisions to kick in early; much of the law rolls out over the next few years.

"We certainly did not expect to see this in this economy," said Gary Claxton, who oversees an annual survey of employer health plans for the nonprofit Kaiser Family Foundation. "It's surprising."

For insurers, the market presents a big opportunity. Nationally, three-quarters of businesses with 10 to 24 workers offer benefits. About half of those with nine or fewer employees provide a health plan. By comparison, 99 percent of companies with more than 200 employees offer benefits.

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 percent jump.

Blue Cross and Blue Shield of North Carolina, the state's largest health insurance company, has aggressively marketed the tax credit. It also is expecting a substantial uptick in policies when it tallies its numbers next month, said Drew Narayan, the company's sales director.

In California, Warner Pacific Insurance Services, a major servicer of insurance brokers, has seen business grow more than 10 percent 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 percent jump in the number of small businesses buying insurance since April, the first full month after the legislation was signed into law.

The independent, nonprofit insurer has been particularly aggressive in marketing the new tax credit, which can mean a discount of as much as 35 percent for very small companies with low payrolls.

"One of the biggest problems in the small-group market is affordability," said Ron Rowe, who oversees small-group sales for the insurer. "We looked at the tax credit and said, 'This is perfect.' "

Rowe said that 38 percent of the businesses it is signing up had not offered health benefits before.

It's unclear how many businesses around the country are taking advantage of the new tax breaks. National statistics will not be available until next year, after 2010 tax returns are analyzed.

Many small businesses don't qualify for the tax break, which is available to employers that have fewer than 25 full-time positions and pay an average salary of less than $50,000 a year.

And only those with fewer than 10 employees and an average salary of less than $25,000 a year can claim the full 35 percent credit. Employers with more employees and higher salaries can get a smaller credit.

"I'm not sure the credit is big enough to convince anyone to buy insurance that hasn't already," said Russ Childers, an insurance broker in southern Georgia. Childers said he expected about 10 percent of the firms he works with to qualify for some tax break.

For many businesses, even the tax break may not make insurance affordable at a time when the average premium for an individual health plan is more than $5,000 a year.

That has prompted some critics of the health insurance overhaul, including the conservative National Federation of Independent Business, to dismiss the tax credit.

Some insurers have seen a decrease in small-business sales. But in Kansas City, officials at Blue Cross Blue Shield say the credit is a major selling point.

"I hear some people saying that this tax credit is not a big deal, that most small businesses won't qualify," Rowe said. "Well, I wanted to sell to those that do."

Nationwide, the Kaiser survey found that 59 percent of firms with fewer than 10 employees offered health benefits, up from 46 percent last year.

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