Brief: State mandates drive up insurance costs for small businesses

A new brief by the National Center for Policy Analysis argues that small business employees are much less likely to have access to employer-sponsored health coverage than employees at larger firms because of the high number of state mandates required for small-group policies (Source: “Why Health Insurance Costs are Higher for Small Businesses,” National Center for Policy Analyis Daily Policy Digest, Feb. 11, 2009).

According to Daniel Wityk, a legislative assistant at NCPA and author of the brief, “Costs are higher for small-group insurance because states require small-group health policies to cover certain conditions, treatments and providers. Large employers often self-insure. Their plans are governed by federal law rather than state regulations, and federal government mandates fewer benefits.”

According to Kaiser Family Foundation data that is cited in the brief, 20 million of the 45.7 million Americans who do not have health insurance work for, or are in families with someone who works for, companies with 50 or fewer employees. Among companies with more than 50 employees, 95.6 percent of workers have health insurance, compared to 42.6 percent of individuals working for small businesses.

The NCPA argues that allowing small business to purchace insurance across state lines would dramatically lower the cost of premiums and therefore, the number of small businesses that offer coverage to their employees.