By Getahn Ward, The Tennessean
May 8, 2008
Small businesses would be able to join together in co-operatives to buy health insurance under a bill on its way to Gov. Phil Bredesen’s desk for signature, but some observers doubt whether it would lead to significantly lower costs or more coverage for uninsured workers.
According to critics, the small-business groups likely to form wouldn’t be large enough to attract most insurers.
“It sounds good; it makes good political theater, but in the end it turns the concept of large numbers that insurance works off on its head,” said Frank Knapp, a small-business advocate in South Carolina, where a similar bill passed the legislature earlier this year.
South Carolina’s latest legislation allows groups of at least 10 small businesses to unite in a bid to negotiate cheaper insurance rates. But that state’s Small Business Chamber of Commerce, headed by Knapp, doesn’t expect it to have a wide impact.
In Tennessee, small-business cooperatives must contain at least 1,000 eligible employees or a minimum of 10 participating employers with between two and 50 employees each to qualify.
Proponents say that the improved stability and predictability of rates that comes with larger groups would help ease the burden small employers face when trying to offer affordable health insurance benefits.
“It just levels the playing field,” said state Rep. Charles Curtiss, D-Sparta, sponsor of the bill that passed the House of Representatives here earlier this week. The bill also has passed the Senate.
Efforts to allow small businesses to pool together, however, haven’t always produced the desired results, said Edmund Huislmaier, a senior research fellow at conservative think tank The Heritage Foundation in Washington.
Challenges for such cooperatives include higher turnover among employees at small businesses and a lack of size to create attractive rates, Huislmaier said. “The ones that have been successful are the ones that offer choice of different health insurance plans from different insurers,” he said of small-business cooperatives.
If signed by Bredesen, Tennessee’s law would go into effect Jan. 1., said Jim Brown, state director of the National Federation of Independent Business, which pushed for the legislation here. The small-business lobby has held discussions with insurance carriers on offering products, he said.