Health Insurance for Small Business

Reducing Uninsurance by Reforming Health Insurance in the Small-Business Sector

"While most uninsured people are in working families, they are not spread evenly across the workplace. Instead, they are heavily concentrated in the small-business sector."

"The concentration of uninsurance in small-business and lower-income households helps to explain the high level of uninsurance among non-managers in such occupations as agriculture (42.7 percent of non-managers uninsured), construction (37.8 percent), and services (34.6 percent), where small firms and lower-income households are disproportionately represented."

"There are certainly weaknesses in using the large-business sector to provide insurance, but it does function as a workable system; however, for close to a majority of workers in small firms, the system of health insurance in the small-business sector is practically dysfunctional."

"To address the inherent weakness of employer-sponsored coverage in the small-business sector, policymakers should not try to force or induce small employers to act like large-firm sponsors of insurance. That will never be effective. Instead, they should empower employees of small firms to make the same choices as employees of large firms while enabling small employers to facilitate those choices. Specifically, Congress should:"

- "Create a refundable tax credit for workers in small firms in order to eliminate the bias against employees choosing their own coverage and to subsidize those who need the most help."

- "Create alternative pools for employees of small firms--including plans offered through churches, unions, and other intermediaries--so that these workers and their families can access a wide range of affordable plans."

- "Make it easier for employees of small firms to sign up for insurance at the workplace--even when the employer does not sponsor insurance--by removing tax and regulatory obstacles."

Stuart M. Butler, Ph.D., The Heritage Foundation