State Programs to Subsidize or Reduce the Cost of Health Insurance for Small Businesses and Individuals

"Premium assistance" is a health insurance purchasing strategy in which a state uses public funds to pay for a portion of the premium costs of employer-sponsored insurance (ESI) for eligible populations because they want to take advantage of the contributions that employers make toward the cost of employee health insurance coverage. States reason that the savings that will result from leveraging employer contributions can help address tight state budgets and provide a mechanism to cover a greater number of the uninsured population. The potential to reduce state costs and cover more people is attractive; however, many factors affect how well premium assistance works in a given state. Below are examples of how states use premium assistance to expand coverage. This is not an exhaustive listing, but a sampling of the different strategies currently be used.

In an attempt to directly address the fastest growing uninsured population (young adults), state lawmakers are proposing and enacting legislation that extends dependent benefits to older children. Typically, children lose health care coverage under a parent or other legal caregiver on their 19th birthday. Full-time students are often given an exception with dependent status ending at graduation or a specified age. States have addressed specific populations within this age group as well, ensuring that students who take a leave of absence from school due to illness, injury, or service in the armed forces do not lose their health insurance. For more information, click here.

For other state initiatives to make health insurance more affordable for small business, please click here.

Updated Dec. 2007

Examples of state programs to subsidize health insurance for small businesses and individuals

Arkansas Safety Net Benefit Program aims to increase health insurance coverage through a public/private partnership that will provide a "safety net" benefit package to approximately 50,000 uninsured individuals over 5 years.

Arizona's premium tax credit establishes a health insurance premium discount program for uninsured small business (2-25 employees) and individuals with incomes of less that 250 percent FPL. This allows small businesses and individuals to apply for a discount certificate to the Department of Revenue.

Kentucky's Insurance Coverage, Affordability and Relief to Small Employers (ICARE) program, is a four year pilot program that targets small employers (2-25 employees) who have been uninsured for at least 12 months and average salary does not exceed 300 FPL.

The employer pays at least 50% of premiums and the state pays $40 per employee, per month. The incentive will be reduced each year by $10.
Small employer who offer insurance and pay 50% or more of the premium with at least 1 employee in the group with a high-cost medical condition will receive an incentive to remain insured--$60 per employee, per month which will be reduced each year by $15. Premiums must be discounted for a healthy lifestyle

Maryland's Working Families and Small Business Health Coverage Act, targets small business by offering subsidies for coverage and expanding Medicaid eligibility to some adult populations. In order to be eligible for the subsidy, employers must establish a Section 125 payroll deduction and offer a wellness benefit.

Montana's Small Business Health Care Affordability Act, targets small business (2 to 9 employees) by creating a new purchasing pool--The State Health Insurance Purchasing Pool. Insurance purchased through this pool will be subsidized on a sliding scale.

Tax credits are extended to small business currently offering health insurance to their employees
Program is funded by a tobacco tax

New Mexico's New Health Plan Initiative provides low-cost basic health insurance through employer-bases benefit program in conjunction with the state.

Covers uninsured adults up to 200% federal poverty guidelines through employer-sponsored coverage.
Financed through employer contribution, employee contribution (based on income), Medicaid(matched from unused SCHIP dollars)
Benefits similar to basic commercial plan

New York's Program to provide publicly-funded or other type of financed reinsurance for private coverage to assume a portion of insurer's high-cost claims.

State subsidizes cost for expensive people with the goal of lowering premiums for all, based on the knowledge that 20% of people account for 80% of health care spending.
State requires all HMOs to offer product
Small firms with low-wage workers, low income self-employed, uninsured workers without access to employer sponsored insurance may enroll.

Oklahoma's Employer/Employee Partnership for Insurance Coverage (O-EPIC) aims to cover an additional 50,000 residents with incomes at or below 185 percent FPL. The O-EPIC Premium Assistance Program with pay part of the health plan premiums for eligible employees working for qualified Oklahoma small businesses (with 25 or few employees).

Funded through the state general fund revenues generated by a tobacco tax, Medicaid matching funds, and employer/ employee contributions

The Oregon Health Plan (OHP) is a limited benefit package. The program covers only a limited number of uninsured adults who are not eligible for traditional Medicaid programs or the Children's Health Insurance Program. Most adults who get OHP Standard must pay monthly premiums. OHP Standard does not have copayments. Eligibility for program include:

An adult (19 years or older)
Not getting Medicare
An Oregon resident
A U.S. citizen or a non-citizen who meets the immigration status requirement
Currently without major health insurance coverage and has been without coverage for six months. The six-month waiting period is waived in some cases.
Under the income limit set at the federal poverty level
Under the resource limit set at $2,000
Paid up on OHP premiums billed in the past

Pennsylvania's Health Investment Insurance Act (Act 77 of 2001). Act 77 uses the state's tobacco settlement to provide health insurance to a number of uninsured between the ages of 19 and 64. The program provides health insurance for adults meeting certain income requirements and who do not have health care coverage.

This program -adultBasic- is administered by the Pennsylvania Insurance Department and offers basic benefits, including, preventive care, physician services, diagnosis and treatment of illness or injury, in-patient hospitalization, out-patient hospital services and emergency accident and medical care.

Participation in the adultBasic Program is based on certain eligibility requirements, which include: Having no other health care coverage (including Medicaid or Medicare), lack of prior coverage under any other insurance plan for 90 days prior to enrollment; except for a person (and their spouse) who has been laid off his/her job, family income below 200 percent of the Federal Income Guideline

This program also covers children, click here for more information

Rhode Island WellCare is an affordable health insurance product to being offered as a choice to employers with 50 or fewer employees and to Direct Pay subscribers (Rhode Islanders who do not get insurance through an employer). State-approved, "Wellness Benefit Plans" are priced about 18 percent less than comparable plans on the market. What marks these benefit plans are their cost-sharing initiatives--including enrollee pledges to remain at a healthy weight, complete a health risk assessment and others.

Tennessee's Cover Tennessee is a market based public/private partnership plan for small employers and uninsured workers with incomes below 250 percent of FPL.

Cover Tennessee is basic, major medical coverage for $150 a month with the cost shared equally by the individual, employer, and state government

Texas's 2007 Medicaid reform legislation, pending federal approval, would Create a fund to cover some healthcare costs and provides money for premiums and provides assistance for private insurance enrollment and employer-sponsored plans. Details and

Washington Basic Health Plan is a state-sponsored program that provides affordable health care coverage to low-income Washington residents through private health plans. Administered by The Health Care Authority that also oversees the Basic Health Plus (for children under age 19) and the Maternity Benefits Program (for pregnant women).

To be eligible for Washington Basic Health Plan an individual must meet income requirements, must not be eligible for free or purchased Medicare; not institutionalized at the time of enrollment; and not attending school full-time in the United States on a student visa.

Monthly premiums are based on age, income, family size, and health plan chosen. No copayments are levied for preventive care services . Washington Basic Health includes a $150 annual deductible and a $1,500 annual out-of-pocket maximum for enrollees.

West Virginia's Small Business Plan allows small businesses to tap into the buying power of the Public Employees Insurance Agency (PEIA) through a public/private partnership between PEIA and insurance companies. PEIA is the largest self-insured plan, providing insurance to public employees, state universities, and colleges.

Allows participating carriers to access PEIA's reimbursement rates, enabling the new small business coverage cost to be reduced significantly

State Employer Health Insurance Mandates

For 30 years, The Hawaii Prepaid Health Care Act has required all Hawaii businesses provide insurance to any employee who works at least 20 hours for four consecutive weeks. The Act also set a cap on employees’ contribution to 1.5% of their salary.

The employer mandate is unique in the U.S. because of the Months after the Employment Retirement Income Security Act (ERISA). ERISA pre-empted or superseded all state laws relating to employment benefit plans. In 1977, the federal courts invalidated the Prepaid Health Care Act. But Congress later exempted the PHCA from ERISA. Hawaii is the Only State that mandates employers to provide employees health insurance.