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Berkeley survey finds business support for reform of health-insurance coverage

| 17 September 2003

A survey by researchers at the campus Institute for Labor and Employment, conducted prior to last week’s approval by the state Legislature of a measure requiring many small businesses to provide health care for employees and their families, showed that California employers are generally supportive of health-insurance reform. It also showed that, despite the objections to reform offered by some business interests (in part because of asserted high expenses), the costs of health-insurance reform would be modest for most businesses.

Last Friday, the Legislature approved Senate Bill 2, which requires employers with more than 200 workers to provide health care for employees and their dependents by Jan. 1, 2006, or pay into a state fund that would provide coverage. And by Jan. 1, 2007, businesses with 20 to 199 workers would have to cover employees, but not dependents, or pay into the fund. Businesses with 20 to 50 employees would be required to cover their workers only if the Legislature is able to provide them with a tax subsidy to partly offset any cost increaes. Employees working 100 hours per month or more would be eligible for the insurance coverage. Governor Gray Davis has not yet indicated his position on the legislation, and has until Oct. 15 to act on it.

The 2003 California Establishment Survey was designed by Michael Reich, a professor of economics 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 about proposed health-insurance reforms that were asked last summer of owners, managers, personnel-department officials, and others at 776 business establishments. He and Reich report that 64 percent of these business respondents were supportive of healthcare-reform measures similar to those provided for by SB2. Some 59 percent of business respondents who currently do not offer health insurance to workers also expressed support for such a healthcare reform, they said.

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 provisions of SB2 would find that their competitors would face similar effects, and that most businesses would not likely face cost increases that would erode their competitiveness.

Cost increases estimated
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, 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 an 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, who added, “Our study points to a feasible and affordable — although only partial — solution.”

The Institute for Labor and Employment health insurance reform report is available online at 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.