FOR MANY ENTREPRENEURS trying to build a business, the high cost of health insurance can slam the brakes on growth. To help ease the burden, some states offer generous subsidies aimed at helping small companies provide health care to low-income or rank-and-file workers.
In Massachusetts, for example, “subsidies for low-income folks are better than any other state right now,” says Michael Doonan, a professor at the Heller School for Social Policy and Management at Brandeis University in Waltham, Mass. Driving the subsidies is the state’s landmark 2006 Health Care Reform Law, which requires all residents to obtain or purchase medical insurance. New rules widened the eligibility rules for lower-income uninsured individuals to receive subsidized health care — and boosted savings for small businesses that provide the coverage.
Now, employers with 50 or fewer full-time workers who each earn pretax family incomes up to three times the federal poverty level (that’s $30,630 for an individual and $61,950 for a family of four) can participate in the Insurance Partnership, a federal and state subsidized insurance program. The new rules expand the income limits, which before October 2006 had been set to two times the poverty level.
Under the Insurance Partnership program, Massachusetts employers may receive up to $400 a year when they pay at least 50% of the cost of a single employee’s insurance coverage and up to $1,000 per year for an employee with a family plan. Under the plan, employees who haven’t received health insurance from their employers in the past six months can receive up to $150 for a single person’s coverage and up to an additional $210 per month per child covered under a family plan.
Other states such as Vermont and Maine also provide employer-sponsored plan subsidies. Through the Employer Sponsored Insurance Premium Assistance Program, Vermont offers premium assistance to workers to help them purchase insurance through their employer. Maine, via its program Dirigo Health, usually does as well, however, according to the director of the governor’s office of health policy and finance, Trish Riley, the program recently ran out of funding. Dirigo Health, she says, will continue to pay on previously held policies and is still open to small businesses that don’t need subsidies. For instance, a business owner might still proceed to purchase health care through the program to take advantage of group rates, she says.
Massachusetts, Maine and Vermont are all on track for offering near-universal coverage for individuals, and the governors of California, Pennsylvania and Illinois have proposed similar plans. Critics of the plans say that since these programs typically require businesses to offer health care to employees or pay penalties, small businesses may resort to raising prices or laying off workers.
Some agitated small-business owners have fought for more breaks, and appear to be gaining ground. In Massachusetts, for example, the state’s unsubsidized health-care program called Commonwealth Choice is expected to open to small businesses this summer. While the program doesn’t offer direct subsidies, those workers who earn higher incomes can participate in the program, which will allow workers to join larger health-care pools and give them a choice among providers.