December 15, 2009

What Would Health Care Reform Mean for Small Employers and Their Workers?

Small employers face a unique set of challenges in providing insurance to their employees. High administrative costs and the limited ability to spread risk result in substantially higher premiums for the same benefits when compared to those available to their larger counterparts. These problems are further exacerbated by the fact that small firm employees typically earn lower wages than those in larger firms. These challenges result in offer rates for the smallest firms that are less than half the rates of large employers and lead to high rates of uninsurance among small firm workers. Both the House of Representatives bill, the Affordable Health Care for America Act, and the Senate leadership bill, the Patient Protection and Affordable Care Act, contain a number of provisions that would have significant implications for small employers and their employees in their efforts to obtain affordable health insurance coverage.

In this paper, Linda J. Blumberg and Stacey McMorrow review the barriers to purchasing health insurance coverage for small employers and their workers and examine the implications of the proposed reforms. The paper highlights the differences between the House and Senate approaches, and discuss their potential for improving access and affordability for small employers. The health insurance exchanges, along with the associated insurance market reforms, can be expected to produce substantial improvements in the ability of small employers to obtain affordable coverage. Additional financial assistance in the form of subsidies to low-income individuals will further enhance affordability for small firm workers. Tax credits for employers purchasing coverage are temporary and thus likely to have modest effects.