Posted on 27 Dec 2010
A growing number of small businesses are signing up to give their workers health benefits, according to major insurers around the country. Although not universal, the increase has brought new security to thousands of workers, many of whom did not have insurance or were at risk of losing it.
A tax credit in the nation's new healthcare law provides is an important selling point to companies with fewer than 25 employees and moderate-to-low pay scales, which helps offset the cost of providing benefits. The tax credit is one of the first few provisions to kick in; 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 three to nine employees provide health plans. By comparison, 99% of firms 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% jump.
In California, Warner Pacific Insurance Services in Westlake Village, a major servicer of insurance brokers, has seen business grow more than 10% 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% 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% 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% of the businesses it is signing up had not offered health benefits before.
When the law was signed, the company partnered with H&R Block to create a website for small businesses to calculate how much they can save with the tax credit.
For Bistro Kids, a small business in the Kansas City suburb of Gladstone that serves school meals made with locally grown, organic produce, the deal was too good to pass up.
"We said, 'How could we not do this?'" said Kiersten Firquain, 42, a trained chef who started the company after being appalled by the quality of the food her son was being served at school.
"The whole message of Bistro Kids is doing the right thing," she said as she watched students at Oakhill Day School dig into chili and cornbread made with local beef, cheese and corn. "We wanted to do what was right for our employees, not just for our kids."
Like other small-business owners nationwide, Firquain had been keeping a file of health insurance quotes. But every year, the prices seemed to get more out of reach. "It just wasn't realistic," she said.
Now, Firquain is offering her 10 chefs a standard individual preferred provider organization plan with a $1,000 deductible and $30 co-pays. The employees pay $67 to $212 a month, depending on age and gender.
The company's share, including the tax credit, comes to $434 a month per employee, although that may rise next year as more of Bistro Kids' chefs opt for the health plan. So far, four have signed up for benefits.
It's unclear how many businesses around the country are taking advantage of the new tax credit. National statistics will not be available until next year after 2010 tax returns are analyzed.
Many small businesses don't qualify for the tax credit, 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% 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% of the firms he works with to qualify for some tax credit.
For many businesses, even the tax credit may not make insurance affordable at a time when the average premium for an individual health plan is more than $5,000 a year and many insurers are hitting businesses with double-digit rate increases.
That has prompted some critics of the health insurance overhaul, including the 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."
Blue Cross Blue Shield of North Carolina, another independent nonprofit that has aggressively marketed the tax credit, also is expecting a substantial uptick in policies when it tallies its numbers next month, said Drew Narayan, the company's sales director.
Nationwide, the Kaiser survey found that 59% of firms with three to nine employees offered health benefits, up from 46% last year.
"Prices keep going up, but we are seeing insurers trying to be competitive," said Neil Crosby, Warner Pacific's director of sales. "And businesses are buying, so they must see some value."
Breasia Studios, a recording studio in Maryland, is one of those businesses.
After learning about the tax credit from a local activist, studio owner Jamal Lee got a health plan for his four employees for the first time. He said it's already making a difference.
"You get more done when people are happy," said Lee, who opened the studio five years ago. "And it feels good to look at my employees and know that I'm helping to provide something that they really need."