Government, Courts, and the World of Work

After the bruising battle over paid family leave, supporters of universal health care coverage were relieved when business lobbyists expressed enthusiasm for a legislative proposal to cover every resident in New Jersey. Perhaps proponents should be mindful of unintended consequences.

Most of the adult citizens who are uninsured are employed, primarily by a small business.  According to federal statistics, 54.3% of New Jersey employers with fewer than 50 employees provide health care coverage. This represents about 135,550 employers that employ 737,500 people. 

The biggest reason reported by small business for not offering health care benefits is expense.  In 2007, the average amount that employers paid toward their workers’ health insurance premium rose 9.4% to $7,139. Small employers actually pay more because they do not enjoy the economy of scale derived from a large headcount.

Proponents of universal coverage believe that the small employers who currently provide coverage will likely continue to do so because their premium costs would stabilize over time as more people become insured.  This assumes that as the insurance pool increases, premiums will drop. However, when the state reformed the small employer market in 1993, premiums have increased each year thereafter. In any event, research conducted by The Commonwealth Fund in 2002 indicates that even a 30% reduction in premiums would cause only about 15% of currently uninsured small employers to offer coverage.

It could be that the greatest risk of universal health care coverage is that small employers who are already providing health care insurance to their employees will simply choose not to sponsor a health care plan knowing that their employees will still be covered by a state–mandated plan. Advocates of universal coverage are taking a big leap of faith that small employers will not respond to this incentive to cut back or drop coverage entirely.