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Study: Small-Business Owners Back Tax Credit For Low-Income Employees

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In an attempt to bolster its lobbying efforts on Capitol Hill, National Association of Health Underwriters commissioned a study on how small-business owners would react to a tax credit on health insurance costs for their lower-income employees.

NAHU spokesman Martin Carr says the Washington-based trade group can take the study to Capitol Hill “and say we did a statistically valid survey that says the majority of small-business owners are more than willing to go for a tax credit. Im thinking the people who said no dont really understand it, its just a knee-jerk reaction to another government program.”

Almost half of all small-business owners surveyed who offer health insurance have employees contribute to the cost. The findings suggest that if a tax credit is approved, most small-business owners offering health plans would not as a result decrease their share of the costs.

Thomas Bruderle, NAHUs director of congressional affairs, says the study will be used as an example to legislators of the willingness of small-business owners “to help employees get coverage.”

Among the findings in the study is that three-quarters of small businesses (with between two and 50 benefits-eligible employees) in the United States currently offer employee health insurance.

Those that do offer health insurance have higher sales volumes and often more benefits-eligible employees than small businesses that dont offer health insurance.

Health Maintenance Organizations and Preferred Provider Organizations are the most common plans provided by small businesses, the study finds, with most companies, 81%, offering only one plan.

Of the small businesses that dont currently offer health insurance, the majority has never done so, the study finds. It also finds that a prohibitive cost is the most frequently cited reason for not offering it.

Employees who contribute to the cost of coverage pay on average 42%–about $44 per month–of the total cost, the study says.

The majority of employees making contributions pay an additional cost to add family members onto the coverage, the study finds. The average monthly cost of adding a spouse is $168. That figure increases to $249 per month when both spouse and children are covered.

Eighty-three percent of respondents said the cost of their company health insurance increased last year. The average increase was 15%. Most employers, 71%, said they will change health plans or carriers if there are future increases, and/or have employees share the increased cost. Only 25% would have the employees pay the entire additional cost and even fewer, 21%, would stop providing health insurance.

About half of the respondents that offer health insurance said that all eligible employees take the companys coverage. Seventy-nine percent of employees who dont take company coverage choose not to because they have coverage elsewhere, the study finds. Eighteen percent refuse company coverage because of cost or other financial reasons.

Fifty-nine percent of small businesses and 58% of employees said they are satisfied with their companys health plan; however, employers generally are not satisfied with insurance options available to their company. Nonetheless, most said they dont get negative feedback about their health plan from their employees.

Fifty-two percent of respondents said the high cost of health insurance is a major problem facing health care in the U.S. Twenty-nine percent pointed to a lack of access as a major problem.

Respondents were asked what they thought of four proposed federal health care initiatives. Eighty-four percent said they are in favor of a tax incentive offered through employers to help lower-wage employees pay some or all of their health care premiums. Seventy-six percent said they favor offering lower-income employees a tax incentive or government subsidy to help pay their share of health insurance costs, regardless of where the insurance is bought.

Seventy-one percent favor federal money for states to help buy coverage for people who dont qualify for the Medicaid program but still cant afford health insurance.

Most companies would take part in a government subsidy or tax incentive program to help pay health insurance costs for low-income employees, the study shows.

If a tax incentive were granted, 53% would be unlikely to reduce the company contribution toward their employees health coverage.

The study finds that of the small-business owners who do not offer their employees health coverage, 41% have considered speaking to an agent. Most have not offered coverage not because of negative experiences with agents, but because either their employees have coverage outside of work, the costs are prohibitive or they have too little time to meet with an agent.

Forty-eight percent of respondents said that agents or brokers increase the cost of health care coverage. One-fourth of the total number of respondents feels that agents or brokers work for a specific health plan and are not necessary.

Most respondents who offer health insurance coverage worked with a health insurance agent to select a plan, the study finds.

Presenting them with a number of plans and helping them with claims and problems are among services agents commonly provide, respondents said.

Eighty-seven percent of respondents said agents or brokers could help them get the most from their health insurance. Most also agreed that agents or brokers provide important services and additional value to their coverage.

These findings lead Carr to point to a tangential benefit of the study: that “its refreshing to see that insurance people arent perceived as the bad guy. The agent almost feels like an employee to the small-business owner.”

Bruderle adds that brokers can use the information to make the case to employers who do not currently offer health insurance that they are not alone in being asked to do so.

“There is a pretty good track record of other employers around the country giving coverage,” Bruderle says. “This is a way of retaining good employees and attracting new employees.”

Reproduced from National Underwriter Life & Health/Financial Services Edition, July 20, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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