Members of Congress and witnesses talked here today about the difficulty of helping employees of small businesses get health coverage without making small group market problems even worse.

Helping more employees of small businesses get health coverage is important, because “that’s where half the uninsured are,” Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, said at a committee hearing on small group health insurance reform.

“Some may be thinking that we should be bolder,” Baucus said. “Believe me, I understand the need for broad reform.”

But senators and witnesses noted that bold reforms could backfire by driving up overall costs or causing one type of plan to siphon small groups with younger, healthier members away from some other type of plan.

To reform the system, “do we to use the scalpel or the sledgehammer?” asked Sen. Orrin Hatch, R-Utah.

Whatever the reforms are, “reforms should be structured in such a way as to not undermine the efforts of small employers who do provide coverage to their workers,” testified Linda Blumberg, a researcher at the Urban Institute, Washington.

Some members of Congress have supported the idea of permitting small groups to escape from state benefits mandates by joining multi-state pools.

Even if organizers put single-state plans and multi-state pools on a level playing field, “tremendously entrenched bureaucracies” in each state would try to keep their mandates in the benefits of any regional pool, said Sen. Gordon Smith, R-Ore.

Joel Ario, the acting Pennsylvania insurance commissioner and former Oregon commissioner, said organizers of any efforts to allow multi-state pools for small employers and self employed individuals would have to come up with mechanisms for preventing adverse selection.

The benefits mandates situation has grown more difficult over the past decade, Ario said.

“Today, talking about a one-size-fits-all benefit that applies across the country is a heavier lift than it was 10 to 15 years ago,” Ario said.