Health coverage expands among small businesses

GLADSTONE, Mo. — Major insurers are reporting that a growing number of small businesses are signing up to give their workers health benefits, a sign of potential progress for the nation's battered health-care system.

An important selling point has been a tax credit that the new health-care law provides to companies with fewer than 25 employees and moderate-to-low pay scales to help offset the cost of providing benefits. The tax break is one of the few provisions to kick in early; much of the law rolls out over the next few years.

"We certainly did not expect to see this in this economy," said Gary Claxton, who oversees an annual survey of employer health plans for the nonprofit Kaiser Family Foundation. "It's surprising."

Nationally, three-quarters of businesses with 10 to 24 workers offer benefits. About half of those with nine or fewer employees provide a health plan. By comparison, 99 percent of firms with more than 200 employees offer benefits.

Some insurers now are reporting significant jumps in coverage.

In the six months after the law was signed in March, UnitedHealth Group, the country's largest insurer, added 75,000 new customers who work for companies with fewer than 50 employees.

Coventry Health Care, a Maryland insurer that focuses on small businesses, signed contracts to cover 115,000 new workers in the first nine months of this year, an 8 percent jump.

In California, Warner Pacific Insurance Services, a major servicer of insurance brokers, has seen business grow more than 10 percent this year, an executive said.

And Blue Cross Blue Shield of Kansas City, the largest insurer in the Kansas City, Mo., area, is reporting a 58 percent jump in the number of small businesses buying insurance since April, the first full month after the legislation was signed into law.

Many small businesses don't qualify for the tax break, available to employers that have fewer than 25 full-time positions and pay an average salary of less than $50,000 a year.

And only those with fewer than 10 employees and an average salary of less than $25,000 a year can claim the full 35 percent credit. Employers with more employees and higher salaries can get a smaller credit.

For many businesses, even the tax break may not make insurance affordable at a time when the average premium for an individual health plan is more than $5,000 a year and many insurers are hitting businesses with double-digit rate hikes.

That has prompted some critics of the health-care law, including the conservative National Federation of Independent Business, to dismiss the tax credit.

Yet, the Kaiser survey found that 59 percent of firms with fewer than 10 employees offered health benefits, up from 46 percent last year.

"I hear some people saying that this tax credit is not a big deal, that most small businesses won't qualify," said Ron Rowe, who oversees small-group sales for Blue Cross Blue Shield of Kansas City. "Well, I wanted to sell to those that do."