The effects of the coronavirus shutdown on New Jersey’s small businesses are well known: lost customers, lost revenues, and lost plans for the future amid an unpredictable global pandemic.
Add to that long-running problems in the state’s health insurance market for small businesses, and the hardships for owners and their employees are mounting.
A nonpartisan policy group made recommendations this week to save that sector of the private insurance market, which has the potential to provide coverage to as many as 1.8 million residents but currently covers only about 300,000.
“We need policy changes to make insurance more affordable,” said Linda Schwimmer, president and CEO of the New Jersey Health Care Quality Institute.
The recommendations to state lawmakers include new tax credits for small employers and the use of formularies — lists of preferred drugs — for the first time for prescription coverage. Developed with input from business, insurance and health policy experts and consumer advocates, they would apply to businesses with two to 50 employees.
The changes “are going to be vital in shoring up New Jersey’s small employer health care market,” state Sen. Joseph Vitale, a Democrat who chairs the Senate Health Committee, said Wednesday. He added that he looked forward to turning the report into legislation “that will strengthen our state’s small group market for both employers and consumers.”
Businesses in New Jersey are not required to offer health insurance to their workers. Many small employers, such as hair salons, body shops and restaurants, want to provide coverage, but fewer and fewer do, as premiums rise.
The percentage of employers offering coverage dropped from 87% to 77% from 2014 to 2018, according to the New Jersey Business and Industry Association’s biannual surveys. Businesses cite the cost of insurance as a top concern, said Christine Buteas, the association’s chief government affairs officer.
To cope with higher premiums, the association found, employers may require workers to pay a larger share of premiums, or offer plans with higher deductibles, copayments and coinsurance. Or they may decide not to offer coverage to family members. Some even have taken lower profits to maintain health coverage for their workers.
“More people buying within an insurance market — including those who are healthy as well as those who are less healthy — creates a more stable and sustainable insurance market,” Schwimmer said. Her group’s recommendations are included in the report, titled “Short and Long-Term Strategies to Support Health Care Affordability and Price Transparency for Small Employers and Consumers in New Jersey.”
The number of people covered by small employers dropped from 921,000 to 309,000, from 2005 to the end of 2019. And the pandemic will likely shrink that even further.
One report projects that with “medium,” or 17.5%, unemployment, more than 650,000 people in New Jersey will lose job-based insurance. About 450,000 of them would be expected to enroll in taxpayer-funded Medicaid coverage, under the projections from Health Management Associates, a national research and consulting firm. Another 100,000 would end up uninsured.
The need for change to preserve the market “is urgent,” said David Mordo, a regional vice president of the National Association of Health Underwriters and a compliance specialist in Red Bank with insurance broker BenefitMall.
“We have a situation where people need coverage,” he said. “People would rather have health insurance paid for in part by their employer than a wage increase. … We need to do what we can to keep insurance in force for these people.”
The recommendations include:
- Offering a state-based tax credit to small employers that offer health plans meeting regulations for comprehensive benefits under the Affordable Care Act.
- Increasing competition in the small-group market by eliminating the requirement that insurance companies must also sell health plans in the individual market.
- Phasing out or restricting self-funded plans for small employers, so that all plans and their purchasers play by the same rules.
- Removing restrictions that prevent health benefit plans from using a prescription drug formulary.
“Now more than ever, the state needs to ensure there are viable options for people to get high-quality and affordable coverage and that small employers and their employees are not left out of these efforts,” the report said.
Lindy Washburn is a senior health care reporter for NorthJersey.com.