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Health Care/A Hidden Cost
Strategy I
Employer Costs
(Redaciig Small
through State and Multi-Stale Risk Pools)
Approximately two-thirds of
those who are employed, but
uninsured, work for companies
with 25 or fewer employees. The
reasons why employers of small
companies do not offer health
insurance coverage are several
and varied:
1. The premiums are
higher per worker because
there are fewer employees
over which to spread the
risk.
2. Small business employ
ers do not benefit as much
as employers in large
companies from the tax
advantages associated
with offering health
insurance.
3. Small business employ
ers experience higher fixed
costs in choosing and
administering a health plan
than larger organizations.
4. There is a higher rate of
turnover and small busi
nesses use a greater num
ber of seasonal and part-
time employees; this
turnover increases small
business cost as
compared to larger
establishments.
5. Small business employ
ers tend to have narrower
profit margins with which
to pay the cost of insur
ance premiums.
6. Workers in low paying
jobs prefer to receive cash
benefits rather than fringes.
THE
M IL
PROBLEM
• ft million Americans are
without any health
insurance coverage;
• 19 million Americans who
have no health insurance
coverage are part of
families where at least one
person is employed full
time;
• 12 million uninsured
persons are children under
the age of 1$;
• Approximately IS million
uninsured persons are
between the ages of 17
and 49.
While these reasons, among
others, may make small business
employers wary of proposals for a
mandated health insurance pro
gram, an effective mechanism for
reducing the fear of cost is to allow
them to participate in an insurance
risk pool with other small business
employers. Insurance risk pools are
designed to bring together a num
ber of small employers into one
large group, enabling individuals
within the group to obtain lower-
cost health insurance premiums.
As a collective, employers of small
business are able to negotiate
less costly insurance plans than
would ordinarily be possible on a
company-by-company basis.
Cleveland, Ohio has taken this
approach. Its “ Council of Smaller
Enterprises” arranges health insur
ance coverage for 100,000 em
ployees working for 4,500 small
businesses.
To gain greater cost benefits,
this approach could be applied on
a regional basis or involve several
states so that more small business
could participate with the risk
spread over an even larger
number of participants.
Strategy II
(Tax ( H its for Small Business Employers dial
Provide Health l im in e (overage lor Their
Employees)
As an incentive for small busi
ness employers to provide health
insurance coverage, a tax credit
equal to one-fifth of the cost of the
coverage for the first five years of
the program could be offered.
Some of the revenue lost from this
approach could be offset by a
slight hike in the Oregon cigarette
tax. For example, a one cent in
crease in the cigarette tax would
yield approximately three million
dollars in additional revenues.
Tax credits provide an alterna
tive to mandated health insurance
coverage and a reason to partici
pate in the design of a plan.
Strategy III
(I sing Lotteiy Dollars to Fund Health lim m e
h r the Working Poor)
While supporters of every
good cause have made proposals
for the use of lottery money, desig
nating a portion of these funds for
health care makes sense and is
consistent with the program’s ob
jective: to promote economic de
velopment in the State of Oregon.
Helping small businesses provide