Expert Outlines Plan for Providing Insurance to Small-Business Workers
WASHINGTON, JUNE 18, 2004-Employees of small
businesses account for half of those without health insurance in
America. But if the small businesses themselves didn't have to find
and purchase the plans for their workers to get tax help to pay for
coverage-and if Congress could make a few regulatory changes-much
of the problem would take care of itself, says a new paper from The
Stuart Butler, vice president for domestic and economic policy
studies at Heritage, a well-respected health-care expert and author
of the paper, suggests three steps:
Create a health-care refundable tax credit for
workers in small firms. A refundable credit-which lets workers
reduce their tax burden by the amount they pay for, in this case,
health insurance and receive a refund if they reduce it by more
than they owe-would eliminate bias against allowing them to select
their own coverage. It also would subsidize those who need the most
Establish alternative insurance pools for
employees of small firms. In addition, allow workers to buy
insurance through churches, unions and other intermediaries rather
than requiring them to buy insurance from their employers.
Remove tax and regulatory obstacles that
effectively prevent employees from finding the plans that best suit
their needs and that discourage employers from merely handling the
transactions through payroll deductions, etc., rather than having
to organize the coverage themselves.
"The high rate of uninsurance among working families in small firms
are a testament to the limitations of the employment-based health
system in small business," says Butler. "Today, the tax system and
government insurance rules discourage other, better arrangements
for these uninsured families. This needs to be changed."
One key, says Butler, is for small employers to stop thinking in
terms of actually organizing health benefits-trying to provide a
certain level of coverage with certain benefits-and adopt a
different approach. Today, employers must shop for health insurance
regardless of whether they can get a good deal or whether a plan
meets the disparate needs of all employees. These hassles cause
many small employers to reject providing benefits.
Under the approach Butler advocates, employers still handle the
transactions, but they don't have to shop for the insurance in
order for their workers to get a tax subsidy. Employees benefit
because they retain the subsidy and get the plans of their choice.
The Federal Employees Health Benefits Program, one of the most
well-liked health systems offered to employees anywhere in the
country, has used this approach for nearly 40 years.
"We're making it increasingly difficult for small businesses to
offer health insurance, and we're doing so at a most inopportune
time," says Butler. "In the future, more and more employees will
work for these small firms, and, thanks to advances in medicine and
other factors, their health needs will be more disparate than ever.
These reforms would make coverage available to far more working
Americans than ever before.
"But for this to occur, Congress must recognize that while the
place of employment is the most convenient place to obtain health
insurance, it isn't critical to make tax relief to families
contingent upon their employers sponsoring their coverage."