Health Insurers Balk at Small Business Reforms

Even as health insurance companies promise to support President Obama’s push to provide insurance coverage for the estimated 50 million Americans who are currently uninsured, they have been relatively silent about making changes to the small business market, a category that includes many medical practices. About 40% of the nation’s workers are employed by businesses with fewer than 100 employees and some industry observers estimate that about half of the nation’s uninsured are either self-employed or work for a small business that does not provide health insurance.

Health insurers have promised to loosen their underwriting criteria for individuals, selling them policies without regard to pre-existing conditions, and to stop basing premiums on an applicant’s health status. So far, those promises have not been extended to the small business market, which is a prime profit center for insurers. For small-business owners, however, rising insurance costs have forced them into some unpleasant choices: asking employees to foot a bigger portion of the insurance premium, cutting back on insurance coverage, or dropping insurance entirely.

Unlike big companies, many of which are self-insured, small businesses buy coverage like individuals do and have similar problems. Insurers may try to avoid covering likely health risks and often base premiums on arcane underwriting rules that differ from state to state. Many small business owners claim that this hodge-podge system makes the small business market dysfunctional and they see it as an issue that must be addressed if true health insurance reform is to be achieved.