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Is Small Business the Key to Insuring More Californians?

Richard Kronick, Ph.D., University of California at San Diego, School of Medicine

This issue brief examines the potential for reducing California's uninsured population by increasing the number of small businesses that offer health coverage. It concludes that any gains from such an approach are likely to be both limited in scope and difficult to achieve.

As policymakers and politicians grapple with reducing the number of uninsured Californians, attention often turns to the role of small businesses, which are far less likely to offer health coverage than large employers.

This 2005 issue brief provides information about the insurance status of small business employees, the rate at which small firms offer benefits, and the expected effects of policies designed to increase coverage within this group.

The brief presents a statewide analysis which finds that uninsured full-time workers employed by small businesses, along with their dependents, account for only 18% of the state's uninsured residents. It also summarizes the results of a multi-year experiment in which subsidized health insurance was offered to small firms in San Diego, with modest effects. The relatively small number of individuals affected and the reluctance of small employers to offer coverage -- even in the presence of incentives -- offer clues about the difficulty of relying on small businesses to significantly reduce the number of the uninsured.

According to the study, a considerable percentage of small business employees already have some form of health coverage, while small businesses that don't offer coverage tend not to be swayed by reductions in the cost of insurance. Although voluntary initiatives among small businesses can reduce the number of uninsured in California, the author concludes that any coverage gains would be limited in scope and difficult to achieve.

The complete issue brief is available under Document Downloads below.

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