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January 23, 2007 > Businesses fear cost of expanding health care coverage

Businesses fear cost of expanding health care coverage

By Theresa Agovino

NEW YORK (AP), Jan 20 _ Businesses are wary of a crop of new state health care proposals to reduce the number of uninsured, fearing the programs will drive up their expenses without solving the problem.

Dissension already has surfaced: Maine's health insurers and businesses have balked at how the state's program to expand coverage has been funded and have filed several lawsuits over the policy.

Smaller companies are especially worried, because they are less likely to provide health insurance than bigger concerns, and some of the proposals call for companies that don't provide coverage to pay into state funds. But experts note that if the taxes paid by small businesses aren't sufficient to provide coverage for the uninsured, larger companies that do provide insurance could be tapped to contribute to state funds as well.

The California proposal calls for businesses with 10 or more employees to offer insurance to workers or pay 4 percent of their payroll into a state fund. That's already a lot of money to a small business but there's also the concern that the amount could rise if the state needs more funds, said Michael Shaw, the National Federation of Independent Business' assistant state director for California.

``Once a statute is on the books it becomes easy to bring up the tax,'' Shaw said

He added the policy could have unintended consequences such as stalling growth, noting that a company might not want to add a 10th employee if it has to start paying the tax. Moreover, Shaw said companies offering health insurance may drop it because paying the 4 percent payroll tax is cheaper than providing coverage, which would only add to problem of the uninsured.

The number of companies providing health insurance across the country is already falling as costs escalate. In 2006, 61 percent of companies offered employees health insurance, down from 69 percent, according to a survey by the Kaiser Family Foundation and the Health Research and Educational Trust.

The decline is especially pronounced in smaller businesses, with the number of companies with three to nine workers offering insurance falling to 48 percent last year from 57 percent in 2000. Among companies with 10 to 24 workers the percentage offering health insurance slipped to 73 percent from 80 percent over the same time period.

However, 98 percent of companies with 200 or more employees offer health insurance.

Christopher G. Renz, a principal with Mercer Health & Benefits, said larger employers are buoyed by the idea that their own health care costs might benefit from a reduction in the number of uninsured. Businesses shoulder some of the expense of the uninsured, because part of the rates they pay to hospitals and other health care providers goes to the cost of uncompensated care.

On the other hand, Renz said, some states might demand that large employers provide health care coverage to part-time or temporary workers, which would be a major expense.

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