Access to Health Insurance: States Attempt to Correct Problems in Small Business Health Insurance Market

GAO discussed state efforts to improve the availability and affordability of health insurance for small businesses. GAO noted that: (1) 43 states have initiated one or more insurance regulatory reforms aimed at improving access to affordable health insurance for small firms and their employees; (2) nearly half of the states have passed legislation reducing or eliminating mandated benefits and now permit insurance companies to offer lower-cost health insurance policies to small firms; (3) insurers in most of those states have offered plans to the small group market with premiums up to 40 percent lower than existing small group policies; (4) some states have also tried to ease the financial burden confronting small firms in the insurance market by subsidizing insurance premiums through direct and indirect subsidies, including tax credits and premium tax waivers that allow employers to provide and for employees to purchase health insurance; (5) some states use such risk-pooling mechanisms as high-risk pools, reinsurance pools, and small employer pools to address small firms' inability to spread risks across a large number of employees and exert buying power in the health services market; and (6) early indications show that state initiatives have led to only modest gains in the number of firms offering health insurance.