CONSAD Research Corporation

Health Care

ANALYSIS OF THE IMPACT OF SMALL BUSINESS INSURANCE REFORM ON BUSINESS, EMPLOYEES, AND THEIR FAMILIES

The National Federation of Independent Business Foundation (NFIB)

The U.S. Congress has repeatedly considered major health care reform legislation in the past few years. Recently, the Expansion of Portability and Health Insurance Coverage Act of 1997 (EPHIC) has been proposed in the House. EPHIC would permit certain groups like trade associations to form health insurance pools, with the aim of providing affordable and convenient health insurance plans to their member organizations. The sponsors of this legislation expect that, as a consequence of EPHIC, small businesses, who currently purchase health insurance for their employees in the small group market, will gain the advantages inherent in large group insurance. These include risk-spreading, greater bargaining power vis-a-vis health care provider networks, the potential for self-insurance, and decreased per-capita administrative costs.

For this research analysis, CONSAD created a database of the health insurance coverage of Americans using data from primary and secondary sources. Specifically, the data relate the health insurance coverage of working individuals and their families to demographic and occupational factors, especially the size of firms employing the workers. Data from the literature were also gathered concerning the characteristics of firms which do provide some employees with health insurance plans. These data were then used in a proprietary economic model to estimate the number of workers who would newly obtain employer-sponsored health insurance if EPHIC were to become law.

CONSAD also evaluated other potential impacts of the bill, such as adverse risk selection and the financial stability of the association health plans that EPHIC would give rise to. Furthermore, CONSAD performed an economic study concerning the decisions of firms to obtain health insurance plans for their workers. These qualitative and quantitative results were utilized in the development of the economic model and its inputs.

The results of this analysis demonstrate that, if implemented, the EPHIC bill will increase the number of employees of small businesses who receive employer-provided health care insurance.

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