HHS offers employers financial incentives

October 1, 2010

For health reform to be a success, employers must continue to provide healthcare benefits

WASHINGTON-For health reform to be a success, employers must continue to-or in the case of small firms, begin to-provide healthcare benefits to employees. To this end, the Department of Health and Human Services (HHS) has been rolling out incentives for employer-based coverage.

The incentives are especially designed for the many small companies that have found health benefits too costly. Tax credits are available this year to help small firms pay health insurance premiums, and HHS recently made subsidies available to cover some costs of coverage for early retirees.

Evidence is emerging that these incentives might have an impact, particularly on small firms and individuals that are most in need of assistance.

Somewhat surprising, a survey of employer health benefits unveiled by the Kaiser Family Foundation a few weeks ago indicates a rise in the number of firms offering health benefits in 2010. The main increase involved very small firms; 59% of companies with fewer than 10 workers now provide coverage, up from 46% last year. The Health Research & Educational Trust (HRET) conducted the annual survey for the foundation.

Even though this kind of change actually affects very few workers, the increase could be a sign that small employers will respond positively to tax credits and other initiatives that reduce the cost of coverage.

Heidi Whitmore, a study co-author and senior research scientist at the National Opinion Research Center, says it's plausible that more firms are offering coverage. However, she speculates that many small firms that do not offer health benefits have gone out of business in the recession and skewed the numbers. The HRET study has tracked benefit data for 12 years.

A Commonwealth Fund report calculates that the tax credit for small companies authorized by the Patient Protection and Affordable Care Act (PPACA) may help more than 16 million employees obtain coverage. The credits are available this year to help small firms offset some of the cost of health insurance premiums, and the Congressional Budget Office estimates that the program could provide $40 billion in support over the next decade. The credit is modest and not everyone is eligible, according to Janet Trautwein, executive vice president of the National Association of Health Underwriters. But, she adds, the credit "provides an incentive for small employers to stay in the game."

While the credits and other incentives may spur employers to retain coverage for the next few years, the big question is whether these strategies will continue to have that effect after state-based health insurance exchanges emerge in 2014.