Growth Strategies

Kerry Eyes Fed Pool for Sickest Workers

"Just 1 percent of the population accounts for over 20 percent of health-care expenses," the senator says.
Sarah JohnsonFebruary 14, 2007

With an eye towards making it more attractive for small businesses to provide health insurance benefits, Sen. John Kerry plans to introduce a bill to create a federal reinsurance pool to help employers pay for the care of seriously ill employees.

Under Kerry’s proposal, which he touted during his 2004 presidential bid, the federal government would pay back employers for a percentage of workers who have extremely high health-care expenses. “The high costs of treating the sickest patients are driving up the price tag for everyone else and taking a huge toll on business,” Kerry said during a meeting of the Small Business & Entrepreneurship Committee, which he chairs. “Just 1 percent of the population accounts for over 20 percent of health-care expenses.”

His 2004 proposal required employers to pay for premiums for up to $50,000 of health-insurance coverage. The rest would be considered “catastrophic” and be paid for by the reinsurance pool. Kerry estimates his plan could save businesses $1,500 per employee.

Drive Business Strategy and Growth

Drive Business Strategy and Growth

Learn how NetSuite Financial Management allows you to quickly and easily model what-if scenarios and generate reports.

The catch: in exchange for getting help from the government, employers would have to provide health benefits to their employees and fund preventative programs, such as cancer screenings. Currently, 61 percent of firms with fewer than 50 employees offer their workers health insurance, according to Tarren Bragdon, director of health reform initiatives at the Maine Heritage Policy Center.

A reformed health-care system would give small businesses “access to functioning insurance markets, it would ensure that they and their employees receive adequate care when they need it, and it would improve the affordability of offering and purchasing insurance,” Kerry said. Without the president’s support for an overhauled system, Congress needs to introduce piecemeal legislation to help small businesses with their insurance premiums, he added.

President Bush recently introduced a health-care proposal that would tax employer-provided benefits above a certain level, discouraging more employees from requesting what Bush called “expensive, gold-plated plans.” That idea, however, would put a burden on a small business, according to Kerry. “If just one employee gets sick, the insurance premium would easily exceed the amount of the deduction, thereby imposing tax penalties on all the workers or causing the small business to drop coverage all together,” he said.

Kerry, who has said he will not run for president in 2008, introduced another proposal last month that would give smaller firms a tax incentive to provide health benefits to their employees. Under his Small Business Health Care Tax Credit Act, small businesses with fewer than 50 workers that pay for at least half of those workers’ insurance premium would be eligible. The tax credit could cut health insurance costs by up to 50 percent for small business owners, the Massachusetts Democratic said, and applies only to employees who earn between $5,000 and $50,000 each year.

Also looking for ways to ease the benefits burdens for small business owners is the committee’s ranking minority member, Olympia Snowe (R-Maine). Earlier this week, she reintroduced legislation to make it easier for small businesses to use cafeteria tax plans. These accounts put nontaxable money aside for employees to use toward their health-care needs. Critics say employees lose money if not all of the funds in the plan are spent by the end of the year. Previously part of a larger health-care bill for employees of small businesses, the legislation did not make it past the Senate Finance Committee last year.

4 Powerful Communication Strategies for Your Next Board Meeting