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By Knight Kiplinger

The Kiplinger Washington Editors

Oct. 3, 2008

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States Give Small Business More Health Care Help

Initiatives include subsidies, tax deductions and more-affordable plans.

By Martha Lynn Craver, Associate Editor, The Kiplinger Letter

July 15, 2008

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More states aim to help small business owners provide health insurance to their workers. But they'll forgo ambitious, sweeping reforms and opt instead for modest measures. With more than half the states reporting budget shortfalls, less costly efforts are all they can afford until the economy improves and state revenues pick up. Here's a rundown of what's happening:

New Hampshire will make insurers offer a more-affordable plan to small businesses with up to 50 employees. The plan, expected to be available by October 2009, will be designed by a committee that includes small business owners. The goal is a premium at or below 10% of the previous year's median wage, which currently would be about $262 a month. Premium costs will be controlled by focusing on wellness efforts, such as promoting preventive care and best practices, and managing chronic illnesses.

Florida will allow insurers to offer bare-bones policies to employers with 50 or fewer employees. These policies will be affordable for employers because they will not include the dozens of mandated benefits that other plans in the state must include and that often push the cost beyond reach. Arizona, Colorado, Georgia, Kentucky, Maryland, Rhode Island and Washington state already have similar programs for smalls.

South Carolina will allow smalls to band together to increase their bargaining clout so they can get lower rates when buying insurance coverage for their employees. A group of at least 10 small firms can join together and negotiate cheaper rates. Previous state law allowed businesses to do this but set a minimum of 1000 employees. The new law lowers the threshold to 50.

Oklahoma will expand its program to help small employers so that it includes firms up to 250 workers. The old limit was 50. The state pays 60% of the cost, with employers paying 25% and workers, 15%. The law also expands eligibility in the program to workers by raising the income cap.

Maryland has a new program that offers subsidies to smalls to offset the cost of providing coverage to their employees. Eligible employers must not have offered health coverage to their workers within the past 12 months. They must also meet certain low-wage requirements, have between two and nine employees and establish a Section 125 payroll deduction plan to allow for pretax premium contributions.

Alabama will provide employers with a tax deduction. Effective Jan. 1, 2009, small business owners with fewer than 25 workers will be able to deduct 150% of the amount they pay for employee health insurance premiums from their state income taxes. The new law also allows wage earners of small businesses, who earn $50,000 or less annually, to deduct 150% of what they pay for health insurance from state income taxes.

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