Is Small Business the Key to Insuring More Californians?
By Richard Kronick
California HealthCare Foundation
November 2005
Coverage Expansion
Introduction
There is substantial interest among policy analysts and politicians in increasing health insurance coverage among Californians who work for small business. Such firms are far less likely to offer health benefits than large companies, leading some to suggest that persuading more small employers to provide health coverage could substantially reduce the number of uninsured people in the state.
This issue brief examines the potential to expand health insurance among California’s uninsured through policies aimed at increasing the number of small employers that offer coverage. It provides information about the insurance status of employees in small businesses, the rate at which small employers offer health benefits, and the expected effect of policies designed to increase coverage within this group. As part of this analysis, it reviews the results of a recent experiment in San Diego in which small employers were offered the opportunity to purchase health insurance from a local HMO at reduced rates, a study designed to test the effectiveness of targeted subsidies.
Conclusion
The evidence from the experiment conducted in San Diego, from earlier demonstration programs in a dozen sites around the country, and from a wide range of observational studies suggests that small employers that do not offer insurance are not very responsive to reductions in the price of coverage. While the evidence from any of these studies can be criticized, and none of the work provides a definitive basis to estimate the likely response to some of the tax credit proposals that have been made by politicians of both parties, the breadth and depth of the evidence is enough to convince most health services researchers that employer response to health insurance subsidies would not be large.
http://www.chcf.org/documents/insurance/
IsSmallBusinessTheKeyToInsuringCalifornians.pdf
Comment: This nine page issue brief provides enough details to demonstrate that the conclusion is clearly warranted. Insurance subsidies targeted to uninsured employees of small businesses would have very little impact on reducing the total percentage of uninsured.
Most targeted programs fall far short of covering 100 percent of the targeted populations. Numerous studies confirm that the Medicaid and SCHIP programs fail to enroll a large portion of those eligible, in spite of the establishment of programs specifically designed to increase enrollment rates.
In sharp contrast, the Medicare Part A program enrolls virtually 100 percent of eligible individuals. What is the difference? Enrollment in Medicare Part A is automatic once eligibility status is achieved. Also, Part A does not require the payment of any premiums as it is funded through the tax system as a program of social insurance. There is no reason for the individual to not accept automatic enrollment. (The flawed policies behind Part B, Part D, and Medicare Advantage are another matter that will not be addressed here. Suffice it to say that they do not result in 100 percent enrollment.)
There is a policy lesson here. If we really do want to provide health care coverage for everyone, we need to establish a properly structured program of universal social insurance. Targeted programs added to our highly flawed, wasteful, fragmented system will never get us there.