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UC Berkeley survey finds business support for health insurance reform

– California employers generally support health insurance reform, and reform costs would be modest for most businesses, according to results of a survey released today by researchers at the Institute for Labor and Employment at the University of California, Berkeley.

Their report comes as the state Legislature considers action on proposed health insurance reform in the form of Senate Bill 2. The bill emerged from a conference committee on Tuesday and will be voted on by the Senate and Assembly before the two adjourn on Friday.

The proposed bill would require employers with more than 200 workers to provide health care for employees and their dependents by Jan. 1, 2005, or pay into a state fund that would provide coverage. And by Jan. 1, 2006, businesses with 20 to 199 workers would have to cover employees, but not dependents, or pay into the fund. Employees working 100 hours per month or more would be eligible for the insurance coverage.

The 2003 California Establishment Survey was designed by Michael Reich, a professor of economics at UC Berkeley and research chair at the institute. The survey, which is ongoing, targets private businesses with five or more employees and poses questions about human resource policies, pay, training, workforce composition and benefits.

Arindrajit Dube, a postdoctoral fellow at the institute, analyzed the results of the questions that were asked last summer of owners, managers, personnel department officials and others at 776 establishments about proposed health insurance reforms.

He and Reich report that 64 percent of business respondents support healthcare reform that requires that employers either provide health insurance, or pay a fee into a state fund, to cover the uninsured. Some 59 percent of business respondents who currently do not offer health insurance to workers also support such a healthcare reform, they said.

"The lack of difference is interesting," said Dube. "It shows that, regardless of whether businesses are currently offering insurance or not, they are broadly supportive of a policy that would require all employers to either provide health coverage or pay a fee to the state that covers workers that way."

The study found that 90 percent of firms that currently do not offer health benefits report that they operate in markets in which their competitors also do not provide such benefits.

This suggests, said Reich and Dube, that the businesses most affected by the proposed reform would find that their competitors would face similar effects, and that most businesses would not likely face cost increases that would erode their competitiveness.

Reich's survey data was also used to estimate the increases in costs that various businesses will face from the implementation of Senate Bill 2. Among the California employers to be covered (those with 20 or more employees), the researchers found that the typical business would see an annual increase in costs of $1,343 per newly insured worker, including the cost of insuring dependents. This represents a 0.2 percent increase in overall operating costs for these businesses, the researchers said.

The report said that an estimated 77 percent of covered businesses would see a rise in operating costs of less than 1 percent, and that 0.1 percent of covered businesses - 0.01 percent of all California businesses - would see a rise in operating costs of 4 percent or greater.

Higher premium costs have been responsible for declining insurance coverage in recent years, so a reform that would extend coverage is needed more than ever, said Reich.

"Our study points to a feasible and affordable - although only partial - solution," Reich said.

The Institute for Labor and Employment health insurance reform report is online at: http://www.iir.berkeley.edu/research/healthinsurancereform.html.

Reich will release the complete results of his comprehensive survey of more than 1,000 businesses in 2004.