What Effect is State Mandated Health Insurance Having on Businesses?

With States like Massachusetts currently mandating that businesses provide health insurance to their employees, and many more states like California poised to follow their example, some feel the key to success or failure of such plans has been their real or perceived negative impact on small businesses.

While many business organizations have opposed the so-called "Massachusetts Experiment" on the grounds that it will hurt small business by forcing them to provide health coverage, a recent report by the Wall Street Journal suggests otherwise. Rather than finding that small businesses have had to lay off workers or reduce benefits to meet the mandate, the Journal report said that upon a closer look, "while some small businesses might be squeezed, a great number would be exempt from the rules. In addition, "many businesses and self-employed workers could even benefit by dropping their current health plans and picking up cheaper coverage through state-sponsored programs."

In California for example Governor Schwarzenegger's health-insurance proposal, exempts any business with 10 or fewer workers, that means almost 80% of all employers in the state would be exempt from the health insurance requirement, according to the Small Business Administration's Office of Advocacy. Similarly in Massachusetts who's mandate is about to go into effect, any firm with less than 11 employees, is exempt from the mandate. In Pennsylvania the plan introduced by Gov. Ed Randell in January actually exempts any company with less then 50 employees. And in Vermont where such mandates on health insurance go into effect October 1st, any business with less than 8 employees is exempt from participation in the first year.

The report went on to state that the reasons why most small businesses do not provide health insurance benefits to their employees is because the cost as too high. With the help of afforded them by these State Mandated programs, they have other options. Massachusetts Connector Program for example allows businesses with fewer than 50 employees purchase health insurance coverage for less than $300 for family coverage. A figure that is significantly lower then recent health insurance cost estimates from the Kaiser foundation that estimate the figure at about $11,000.00 per year. The programs currently in effect or proposed in other states have similar initiatives built in that allow small businesses opportunity to purchase group insurance plans at lower rates then they could on the conventional market.

In conclusion the report feels that these new reforms actually help small firms a lot more than hurt them.