With millions of small-business employees still lacking health insurance, policy-makers in the 50 states are trying a wide variety of measures to help employees gain coverage, according to new research recently released by The Nelson A. Rockefeller Institute of Government.

Authors of the new research, funded by the New York State Health Foundation, said studying the efforts under way in all 50 states is critical to finding and spreading solutions to the problems small-business employers and their workers face in attaining affordable health insurance.

The new research is the first nationwide scan of the various measures states are using to address the growing problem of small-group coverage, the Institute noted. In addition to the 50-state research, the Institute released three in-depth case studies on the approaches taken by Maine. Minnesota, and New Jersey.

"States have had some success improving and maintaining access to insurance for small businesses," said Courtney Burke, director of the New York Health Policy Research Center at the Rockefeller Institute of Government. "However, we found that most strategies to address small group coverage have been too small in scale to make a large impact on the rate of uninsured. In addition, each strategy used by the states appears to have both benefits and drawbacks.

"States are still struggling to find a comprehensive, highly successful solution to the problem of coverage for small businesses. There may be no single answer, but further experimentation by states and longer-term research on existing reforms may shed further light on this challenging issue."

The research examined the wide range of measures the 50 states are using to address the problem of workers in the small group medical-insurance market, which typically includes businesses with 50 or fewer employees. Problems of both cost and access to coverage are acute in smaller businesses. For example, only 53 percent of firms with 25 or fewer employees offer employment-based medical-insurance benefits - compared to about 80 percent of firms with 500 or more employees.

"Affordability of health insurance to both employees and employers remains a critical challenge for small businesses. That suggests cost-efficiency strategies to slow the growth of health-care costs or otherwise improve affordability should be part of future reform efforts," Burke added.

"Small businesses employ approximately half of New York State's workers. Despite these economic contributions, they face prohibitively high health insurance premiums," said New York State Health Foundation president and CEO James R. Knickman. "It is critical that the movement to universal coverage in New York State addresses the small group market - we can learn important lessons from other states."

Institute researchers found that while some states are considering comprehensive efforts to expand health-insurance coverage, many incremental reform strategies have not been widely tested by states - including reducing mandates, extending dependent coverage, and simplifying administration through insurance exchanges.

Strategies used today by the states

The new research found that the states today commonly use three sets of measures to address the problem of small-group coverage: regulation of supply, pooling and administrative simplification, and subsidies. Of the three, all 50 states use some form of regulation of supply, especially guaranteed issue and portability. Guaranteed-issue regulations require that insurers issue policies to all members of the small-group market. Portability requires that employees of small businesses be able to access health insurance when they switch jobs.

In the pooling and administrative-simplification category, used by about a dozen states, the most popular measures involved group purchasing arrangements and dependent coverage. Group purchasing allows employers to come together in a pool to buy health insurance, typically at a lower cost. Dependent coverage allows younger dependents to remain on their parents' insurance longer, such as until 25 years of age.

Finally, at least eight states are using various subsidies to enhance small group coverage, including premium subsidies to make insurance more affordable, refundable tax credits, and reinsurance - a type of insurance product that protects against the risk of financial losses from high-cost medical cases.

The Institute's researchers found that most affordability measures, such as reducing insurance costs or providing subsidies for purchasing insurance, are limited in scope and inadequately evaluated to determine their effectiveness.

The research also closely examined the approaches utilized by Maine, Minnesota, and New Jersey. Field research from those three states is designed to help policymakers better understand what they must consider to successfully implement, administer, and finance reform initiatives. Certain administrative and implementation methods - such as inclusive reform and governance, flexibility in modifying reform approaches, attention to program design details, and sustainable funding - were essential to success.

Thomas L. Gais, co-director of the Rockefeller Institute, commented on the research, saying, This research, including the 50-state scan, as well as the three case studies, shows that some states have taken complex, multi-pronged approaches to expanding health insurance coverage in small groups. The research also makes clear especially in the case studies - that reform never ends. Governments need to adjust their policies and administrative efforts to ever-changing circumstances and unexpected developments, and track their performance in helping small groups."

The Nelson A. Rockefeller Institute of Government, the public-policy research arm of the State University of New York, conducts fiscal and programmatic research on American state and local governments.

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