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Look to states, not Congress, for radical health care changes

by on
in Small Business Tax Deduction Strategies

Employers and consumers alike have been wrestling with skyrocketing health care costs, with no end in sight. And while Congress has talked much about reforming the system, it's been spinning its wheels for years.

The same can't be said for state legislatures, where lawmakers are actively passing laws and debating proposals to make health-insurance coverage more affordable and reduce the number of uninsured.

One catalyst is the labor movement, which plans to make 2006 the year it tries to force large employers to spend more on employee health insurance coverage. The AFL-CIO and other union groups have announced a new initiative, dubbed Fair Share Health Care, to persuade state legislators to pass laws requiring employers to contribute a percentage of their payroll to health insurance.

Maryland's legislature just overrode a veto and passed into a law a requirement that private employers with 10,000 or more employees spend at least 8 percent of payroll on health benefits.

Currently, the biggest focus is on one state: Massachusetts. At press time, lawmakers there were looking to finalize far-reaching legislation that would require all employers to either provide health insurance coverage or pay an extra 5 percent to 7 percent in state taxes.

Massachusetts citizens would also be required to acquire coverage if their employers didn't provide it, or if they didn't have an employer. Low-income residents would forfeit their $3,300 personal exemption on state taxes in return for health coverage. Also, any state income-tax refund up to $10,000 would be diverted to insurance funding.

Advocates of the legislation predict that the Massachusetts bill, if passed, could become a national model for universal health care coverage.

Employer concerns

Employers worry that the tax increase would affect small business viability in Massachusetts. Large businesses that already provide health coverage wouldn't be affected. But small businesses, often the engine of job growth, would be faced with buying health coverage or paying the tax. (Family health coverage averages $10,880 nationwide.)

Cherry-picking season?

Lawmakers in Massachusetts and other states instituting reforms (see box below) are trying to avoid creating a pool of uninsured people who are high-risk and high-cost.

Many uninsured people are healthy and young. So, insurers don't benefit from their premium dollars during their healthy years. But when those people age and experience health problems, they're more likely to be insured and become a cost burden.

By requiring such citizens to be insured early on, the state brings them into the insurance pool. The theory: Bring in more people (and, therefore, more dollars) and spread the risk among a wider pool.

Will employers revolt?

Critics of universal-care plans, such as the Massachusetts proposal, warn that either employers will either cut hours so that employees fall below the 20-hour-a-week threshold for earning insurance, or they will contract out jobs to stay below minimum-employee levels.

Massachusetts' officials believe employers won't abandon health care benefits. But rising costs may alter that outlook.

Bottom line: Don't look to Washington for reforms to ease health costs, such as the much-talked-about "association health plan proposal" that has stalled in Congress year after year. Keep an ear to the ground about health care reform efforts in your state legislature.

Good resources: Check with your chamber of commerce, industry association or the National Conference of State Legislatures site, which tracks each state's legislation at www.ncsl.org.

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