Small Business Is Latest Focus in Health Fight NYTimes.com

As the number of people without health insurance continues to rise, many states and Congress have begun to focus on one of the biggest causes: the growing number of small business owners and their workers who are unable to afford coverage.

Louis Lista, owner of the Pond House Cafe in Connecticut, says some of his workers will not pay the 0 a month for coverage.

The states are taking a variety of approaches. To help ease the burden of insurance premiums that have roughly doubled since 2000, some, like Arizona, are extending tax credits to small employers that provide medical coverage.

Others, including New Mexico and Montana, are exploring ways to let small businesses band together to amass the purchasing power of big employers. Massachusetts plans to let small businesses benefit from its state-supervised insurance program. And some states, like Colorado, have passed tougher laws governing what insurers can charge small companies.

“States are being aggressive experimenters, and those lessons learned are going to be invaluable to us in looking at national health reform,” said Michelle Dimarob, manager of legislative affairs for the National Federation of Independent Business.

Congress, meanwhile, is considering legislation that, among other steps, would make it significantly easier for small businesses to organize insurance-buying pools. Despite bipartisan backing in both the House and Senate, it is uncertain whether the bills can be passed in this, an election year. But proponents say the legislation would almost certainly be reintroduced next term.

Because smaller businesses cannot spread the costs and risks of an individual’s high medical bills over a large work force the way a big company can, they often must settle for less-generous coverage that leaves workers with substantial out-of-pocket medical expenses. Many small employers simply choose not to provide health benefits, which can cost more than ,000 a year for a family of four.

Of the 47 million uninsured people in this country, at least 20 million are employed by small businesses or work for themselves — a figure that has increased by an average of more than 500,000 a year since 2000. That is why, even as the presidential candidates John McCain and Barack Obama are floating ideas for making insurance easier to obtain by individuals, there are also efforts under way to address the needs of small businesses.

“Half of the uninsured people in our state are working for small business,” said Nancy Wyman, the state comptroller for Connecticut.

Despite broad interest in the issue, though, making significant changes at the state level can be difficult, politically and practically, as Connecticut’s recent experience shows.

In June, the state’s Republican governor, M. Jodi Rell, vetoed a measure passed by the Democratic-led legislature that was meant to help small employers by letting them join a state-run insurance-purchasing pool.

Big insurers lobbied heavily against the move, arguing that it would do nothing to stem the rising health costs that are reflected in high premiums.

“This debate continues to focus on the premiums rather than health care costs,” said David R. Fusco, the president of Anthem Blue Cross and Blue Shield in Connecticut, the state’s largest insurer for small businesses. “We have to look at the issue of the underlying cost.”

Connecticut Democratic legislators have vowed to try again next year.

Massachusetts, in its widely watched effort to overhaul health insurance, has focused so far on making affordable coverage available to individuals. But later this year the state plans to expand the program to small employers, letting them participate in the state-supervised marketplace set up to give individuals group purchasing power.

Nationally, the percentage of businesses with fewer than 200 employees that offer insurance fell to 59 percent last year, down from 66 percent as recently as 2002, according to the Henry J. Kaiser Family Foundation. And less than half of the smallest companies, those with under 10 employees, were providing coverage last year.

Not only does the cost of insurance tend to be a bigger burden for a smaller business, but Jon R. Gabel, a health policy researcher at the National Opinion Research Center at the University of Chicago, estimates that small firms pay 18 percent more for the same insurance than big companies.

And employers that do continue to provide health benefits are tending to ask workers to pay more of the overall premiums. So even when small business owners offer coverage, their employees may not be able to afford to sign up.

Louis Lista runs the Pond House Cafe in Hartford, where he employs about 50 people, depending on the time of year. Some of his workers are dishwashers, making just or an hour. Although Mr. Lista pays half of the cost of coverage, his employees must nonetheless come up with as much as 0 a month for their share of health insurance. Some choose to go without.