Yankee Fleet, a 50-person charter boat company out of Gloucester, Mass., had wanted to buy health insurance for its employees since the mid-1980s, when rising premiums forced it to drop coverage. But it was stopped by carrier requirements that at least 80% of eligible employees sign up. Yankee Fleet had too many who couldn't afford it, making the whole company ineligible.
Then in 2000, Yankee Fleet joined Massachusetts' Insurance Partnership program, which subsidizes the employee share of health insurance premiums for low-wage workers. Now, about 30% of Yankee Fleet's employees get a subsidy, and the company offers health insurance to everyone. "We would have lost some of our key people if we couldn't get the insurance," says CFO Tom Conley.
SMALL COMPANY, BIG PROBLEM. It's not just the charter fleets of Massachusetts. Across the country, heads of small businesses rank the cost and availability of health insurance as the biggest problem facing their businesses. No wonder -- their deductibles are on average twice as high as those at big companies, and their costs are rising faster. Last year premiums at companies with fewer than 200 employees jumped an average of 16%, compared with 13% at big companies, according to the Henry J. Kaiser Family Foundation. Many small businesses simply give up: Of the roughly 44 million Americans without health insurance, half work for a small company or depend on someone who does, according to the Employee Benefit Research Institute.
Dozens of state and local governments are trying to help. The range of approaches is wide: California and New York City have purchasing pools to make health insurance affordable for small businesses. Other places, such as San Diego, Oregon, and Rhode Island, have subsidies similar to the Massachusetts program. In a few Michigan counties, the government subsidizes both small companies and their employees.
Of course, when it comes to health insurance, good intentions aren't enough. One question is whether these programs can attract small businesses. The other is how to fund them when money is tight. At various times, for instance, Massachusetts' Insurance Partnership has scratched up money from federal matching Medicaid funds, the state budget, and tobacco settlement money. To qualify for the Massachusetts program, small companies must pay at least half their workers' health insurance premiums. Individual employees can't make more than twice the federal poverty guidelines, or $36,800 for a family of four. The program has enrolled 4,500 businesses and 13,000 people since 1999.
By contrast, New York City's HealthPass program offers no subsidies, instead aiming to ease small companies' administrative burden. Employees can choose from 26 plans offered by five insurers, but the business owner writes just one premium check. Those with questions get an in-person consultation. The mayor's office has given $3.8 million to HealthPass, but the program now covers 80% of its costs through fees. Executive Director Mitch Zaretsky says HealthPass will break even when about 18,000 people enroll -- which he hopes will happen by the end of 2004. Since 1999, 1,600 businesses and 12,000 employees -- 62% of whom had no health insurance before -- have signed up. HealthPass cut premiums 25% for law firm co-owners Justine and Gabriel Marous, by letting them buy just coverage they needed.
Another approach comes from Michigan's Muskegon County Community Health Project, which subsidizes health-care costs for employees and employers at small companies with a median wage below $11.50 an hour. In addition to using some Medicaid money, the organization contracted with doctors directly, convincing many to lower their rates. Their plan, Access Health, covers care only within Muskegon county, but 97% of the county's health-care providers participate. After 2 1/2 years, it covers 1,500 people at 400 companies.
Optimists say these initiatives could show the way for federal programs. "We'd argue to members of Congress that they ought to take a close look at the variety of models out there," says Vondie Moore Woodbury, director of the Muskegon County Community Health Project. Small businesses should do their research, too. They might be pleased by what they find. By Kimberly Weisul in New York