Employer-based coverage initiatives focus on facilitating access to employer-sponsored insurance (ESI) coverage. To date, ESI is the primary source of health insurance for Americans therefore states have an incentive to keep the system intact.
States use both public dollars and their regulatory authority to make it easier and/or more affordable for employers to offer coverage and for employees to take-up the coverage offered. Several states mandate that employers offer a certain minimum level of coverage, whether or not state financial support is provided.
Employer-based initiatives aim to accomplish the following goals:
1. Stop the general erosion in employer-sponsored insurance
2. Leverage employer and employee contributions to coverage
3. Reduce premium costs to small employers
4. Reduce premium costs to low-income employees
Strategies used in employer-based initiatives include (among others) the formation of purchasing pools; the provision of re-insurance; the establishment of public program premium subsidies (for employers and/or employees); and the creation of options to buy-in to state employee pools using negotiated payment rates.
The following are examples of employer-based initiatives that are currently in place. Please visit our State Policy Summaries page for more information about current state initiatives.
"Pay or Play" Mandate
Under Massachusetts’ 2006 comprehensive health reform legislation, employers with more than ten employees must either make a "fair and reasonable" contribution to their employees' insurance or pay a fee called a "fair share contribution" of up to $295 per worker per year. Several other states require that employers offer a cafeteria plan, at minimum; however, Massachusetts remains the only state with a mandatory annual employer contribution (i.e., a "pay" component).
Tax Credits for Employers
Insure Montana offers tax credits to small businesses already offering health coverage and provides membership in a purchasing pool to businesses that have not offered health insurance in the past. In 2007, the state bolstered this program by introducing state-sponsored reinsurance, and expanding the definition of "small employer."
Small-Group Purchasing Pools
New Mexico’s Small Employer Insurance Program began in 2006, offering small employers and non-profits with 50 or fewer employees the opportunity to buy into a comprehensive health insurance program comparable to a commercial health plan. This option gives small employers the benefit that larger organizations have through volume-buying, which can reduce the cost of individual employees' health insurance.
Section 125 Plans
In 2008, Iowa passed the Health Care Reform Act of 2008, which included a unique requirement that the Commissioner of Insurance assist small businesses with the voluntary implementation and administration of cafeteria plans, including medical expense reimbursement accounts. The commissioner is required to publicize the assistance available to small employers on the insurance division's website.
To promote competition and affordability in the small-group insurance market, New Hampshire established the New Hampshire Reinsurance Pool in 2006. The board of the reinsurance pool has developed a standard benefit package for small employers on which reinsurance premiums are based. Any insurance carrier may purchase reinsurance from the pool, with a $5,000 deductible per covered life, although such purchase is voluntary.
Buy-in to State Employee Pools
In March 2004, West Virginia passed legislation intended to help small businesses provide coverage for their employees. The new law established the West Virginia Small Business Plan, under which carriers offering insurance to small businesses can access the reimbursement rates and drug purchasing plan of the West Virginia Public Employees Insurance Agency (PEIA). Allowing insurers to do this is expected to bring the small business coverage cost 20 to 25 percent below the typical small-group market rate.