Issue in Brief
 Prepared by the National Women’s Business Council February 2003 

Roundtable Discussion on Health Insurance Issues 

The Problem for America 

•	 The Lack of Access to Health Insurance is an 

Ongoing Concern in the United States. In 2001, 

an estimated 41 million Americans – 14.6% of the 

population – did not have health insurance coverage.1 

The uninsured are less likely to seek adequate medical 

care and preventative services, placing the healthy 

development of themselves and their families at risk.2 

•	 The Majority of Americans Who Lack Health 

Insurance Are Working for Small Companies. 

Americans who work for firms with fewer than 25 

workers were half as likely to have health insurance as 

those who work for companies with 1,000 or more 

workers. This poses a major problem for America 

since 90% of U.S. companies are small businesses that 

employ fewer than 20 workers.1 The percentage of 

small firms offering health insurance to employees was 

estimated at 61% in 2002 – a decline from an 

estimated 67% in 2000. These declines came almost 

exclusively from the smallest of the firms – those with 

fewer than 25 employees. In comparison, 99% of 

firms with 200 or more employees offered health 

benefits in both 2000 and 2002.3 In a recent study by 

the National Association of the Self Employed, 70% 

of respondents did not have health insurance 

themselves or provide it for their employees.4 

•	 The Cost of Health Coverage Is Rising. In 2002, 

monthly premiums for employer-sponsored health 

insurance increased by 12.7% – the largest increase in 

12 years – with small firms seeing an increase of 13.2% 

and large firms an increase of 12.5%. On average, 

annual premiums are $3,060 for single coverage and 

$7,954 for family coverage. Workers’ share of these 

premiums has also risen substantially, with single 

coverage averaging $454 per year (a 27% increase since 

2001) and family coverage averaging $2,084 per year (a 

16% increase since 2001). Similarly, deductibles for 

PPO in-network providers jumped 37% to $276, up 

from $201 last year.3 With health care costs rising and 

a downturn in the economy, workers can expect to pay 

more for coverage but get less for their money, as 

benefits erode. 

The Problem for Women-Owned 

Businesses and Other Small Firms 

•	 Most Small Employers Are Not Offering Health 

Insurance Coverage Because it is Too Costly. 

Eight in ten small employers (84%) who did not offer 

health benefits cite the high cost of premiums as a very 

important factor in reaching that decision. Other 

important reasons include not being able to qualify for 

group rates (57%) and administrative burdens (30%).3 

Health coverage is generally more expensive on a per 

capita basis for smaller companies. In 2002, small 

firms with 3 to 9 employees paid $285 monthly for 

single coverage compared to $269 monthly for firms 

with 10 to 24 employees and $239 monthly for firms 

with 25 to 49 employees.3 Administrative expenses for 

insurers of small group health plans are also higher– 

ranging from 33 to 37% of claims for insurers of small 

group health plans, versus 5 to 11% of claims for large 

companies’ self-insured plans.5 

•	 Many Major Small Business Associations Name 

Health Care as Major Concern for Their 

Membership. The National Association for the SelfEmployed (NASE), the National Association of 

Women Business Owners (NAWBO), the National 

Federation of Independent Business (NFIB), the U.S. 

Chamber of Commerce and other small business 

organizations include access to and/or cost of health 

care among their 2003 legislative priorities. In a recent 

membership survey conducted for NAWBO, members 

were most likely to name association health plans 

among the public policy issues on which they want 

NAWBO to focus. Fifty-eight percent (58%) of 

NAWBO members who own employer firms offer 

health benefits to their employees.6 

•	 When Small Firms Do Offer Health Benefits, 

There Is Typically a Narrow Range of Choices. 

Among small businesses that offer health insurance, 

409 3rd Street, SW, Suite 210  Washington, DC 20024  202-205-3850 (p)  202-205-6825 (f)  www.nwbc.gov 
 

Roundtable Discussion on Health Insurance Issues, pg. 2 

few provide their workers with a choice of health 

plans. Seven in ten (71%) firms that provide health 

benefits offer their workers only one plan option. The 

most prevalent reason cited for offering just one 

option is that the company gets a better deal from 

insurers by requiring all or most employees to be in 

the same plan.3 

•	 Women-owned Businesses Are Affected 

Significantly by the Lack of Affordable Health 

Coverage. With an estimated 9.1 million womenowned firms in the U.S., employing 27.5 million 

workers,7 public policy regarding access to affordable 

health coverage is a major concern for women-owned 

businesses as well as other small employers. The 

inability of many women-owned businesses to offer 

health insurance could mean that an estimated 7.3 

million of the uninsured are employees of womenowned firms.8 

Proposed Solutions 

A number of strategies and proposals, some of which will 

be addressed in the 108th Congress, have been put forth to 

deal with the issues of health care cost and access: 

•	 Association Health Plans (AHPs). Under the 

President’s health care proposal, AHPs can help 

reduce the number of uninsured by giving small 

businesses the same purchasing clout, federal 

regulatory structure, accessibility, affordability, and 

choice in the health care market place that large 

company experience. By allowing small businesses to 

band together across state lines through their 

membership in a bona fide trade association, small 

business owners would be able to offer affordable 

health benefits to employees and their families 

resulting from greater bargaining power, economies of 

scale, and administrative efficiencies.9 Under proposed 

legislation, AHPs would not be required to conform to 

state health insurance coverage mandates and 

insurance regulations—one of the major factors, many 

contend, that contribute to the rising cost of health 

coverage. Currently, labor unions, medium-sized 

businesses, and large companies are able to offer 

health benefits to their employees under one uniform 

federal statute known as ERISA—the Employment 

Retirement Security Act of 1974. This advantage saves 

these organizations from having to comply with 

different rules, regulations, and benefit mandates that 

exist in each of the 50 states.9 If the ability to offer 

AHPs is strengthened through legislation, small 

business owners could purchase health coverage 

through federally regulated, self-funded AHPs, thereby 

expanding the small group market. An estimated 

300,000 to 8.5 million American workers and their 

families could gain health insurance coverage from 

AHP legislation.10 In June 2001, the Senate passed the 

Kennedy-McCain version of the Patient’s Bill of 

Rights (S. 1052) which did not contain AHP 

provisions. In August 2001, the House passed H.R. 

2562, a different version of patient’s rights legislation, 

which contained AHP provisions (rolled in from H.R. 

2315/H.R. 1774 in June). Just recently, H.R. 660, the 

Small Business Health Fairness Act, was introduced 

with more than 70 co-sponsors and bi-partisan 

support. This bill re-introduces many of the elements 

of previous AHP-focused legislation. 

•	 Medical Savings Accounts (MSAs). Under a fouryear pilot project authorized by the Health Insurance 

Portability and Accountability Act (HIPAA) of 1996, 

MSAs were enacted although with a number of 

restrictions. MSAs, which are available only to selfemployed persons or businesses with 50 or fewer 

employees, are tax-exempt personal savings accounts 

to be used for qualified, out-of-pocket medical 

expenses. To be eligible for an MSA, an individual 

must maintain a high deductible health plan (i.e., 

$1,500 to $2,250 for individuals and $3,000 to $4,500 

for families). There are two health-plan options— 

individual and family. The allowable contribution to 

the MSA depends on the size of the health plan 

deductible chosen, and funds not spent by the end of 

the year may be rolled over into the next year. Many 

support the permanent authorization of tax-qualified 

MSAs with certain modifications to make them more 

flexible, such as varying the deductible depending on 

the type of expenditure and extending eligibility to all 

businesses. These HIPAA MSAs are often referred to 

as Archer MSAs, named for Rep. Bill Archer (RTexas) who championed the MSA legislation. The 

Archer MSA demonstration project will end on 

December 31, 2003, unless it is extended or made 

permanent by law. The Medical Savings Account 

Availability Act of 2001(S 1067/HR 1524), introduced 

by Senators Grassley (R-IA) and Toricelli (D-NJ) and 

Representatives Thomas (R-CA) and Lipinski (D-IL) 

would improve MSAs and make them 

permanent.11,12,13 

•	 Refundable Tax Credits. President Bush has 

proposed a refundable tax credit to help the uninsured 

purchase private health insurance coverage. In this 

manner, individuals could purchase health insurance 

that they can own and keep, even if they change jobs 

or their employers change plans. The credit would vary 

by family income and size, and provide a subsidy of up 

to 90% of the cost of health insurance premiums, with 
Roundtable Discussion on Health Insurance Issues, pg. 3 

a maximum credit of $1,000 per adult and $500 per 

child (for up to two children) for a maximum family 

credit of $3,000. The health tax credit would be 

refundable, such that even those who owe no income 

tax would receive credit by filing an income tax return 

and claiming a refund against their health insurance 

expenses. The credit would also be advanceable, based 

on the individual’s prior-year income, making it 

available whenever the individual or family seeks 

health insurance, and before filing an income-tax 

return for that year, in order to reduce the amount of 

the monthly health insurance premium. This proposal 

would also permit certain low-income individuals to 

purchase private insurance for themselves and their 

families through state-sponsored health insurance 

groups or high-risk pools.14,15 

•	 Flexible Spending Accounts (FSAs). FSAs were 

first authorized by Congress in 1978 and are allowed 

under Section 125 of the Internal Revenue Code. They 

enable workers to allow up to $4,000 (pre-tax) tax-free 

money to spend on health care expenses—such as copayments, deductibles, and services—not otherwise 

covered by their insurance, or to pay for health 

insurance premiums. FSAs function exactly like MSAs, 

except those funds not used by the end of the year are 

returned and cannot be carried over for future 

expenses. In order for workers to be allowed to take 

control of their health care costs, such limitations 

would need to be changed.9 

•	 Health Marts. Spearheaded by Rep. Tom Bliley (RVA), Health Marts are administrative entities or 

cooperatives of workers, employers, insurers, and 

consumers that are formed to offer more choice in 

employer-based health coverage. Instead of selecting a 

health insurance carrier for all of a company’s 

employees, the employer would sign up with a Health 

Mart which, in turn, would offer workers a wide range 

of health coverage options (e.g., HMOs, PPO plans, 

MSAs, and other vehicles). Employees would then 

select the health insurance coverage that they prefer. 

Health Marts would offer multiple health plans, accept 

all small employers, and conform to state laws 

governing differences in premiums among small firms, 

but would be free of state mandates that require 

coverage of certain benefits and providers. In theory, 

this would allow them to offer a less costly benefit 

package. Health Marts are similar in many respects to 

Health Purchasing Cooperatives (HPCs) which have 

been initiated in several states, offering collective 

purchasing arrangements for small employers.16, 17 

•	 Cafeteria Plans. As its name suggests, cafeteria plans 

(also referred to as “Flexible Spending Plans” or 

“Section 125 Plans”) allow each employee to choose 

from among a menu of predetermined options in 

deciding where their benefit dollars will be spent— 

including medical, accident, disability, vision, dental, 

and group term life insurance—and the amount of the 

benefit. Funded through “tomorrow’s earnings”, 

employees must estimate the anticipated cost of such 

expenses for the upcoming year and request to have 

the estimated amount redirected from wages into the 

plan. Benefits are paid through payroll withholding 

with pre-tax dollars. Such plans allow small firms to 

offer benefits that would otherwise be unaffordable 

with real tax savings to employees.18 

•	 Consumer-Choice Health Purchasing Groups 

(CHPGs). CHPGs bring employers and consumer 

together for the purpose of collectively purchasing 

health coverage form health plans. Governed by an 

employer-consumer board, CHPGs provide employees 

of participating firms with information to compare the 

price, characteristics, and performance of each plan. 

Employees then choose a plan that best fits their needs 

and preferences, and the CHPG enrolls employees in 

the plan of their choice.19 

•	 Defined Contribution Health Insurance. This 

strategy allows employees to select from any health 

plan being offered, at a cost that he or she chooses to 

pay, using both their employer contributions and the 

personal contributions that they make, instead of 

having the employer select plan options for their 

workers, as is customarily done in employer-sponsored 

health coverage. If the employer’s contribution does 

not cover the full cost, the worker would supplement 

it with their own funds or choose a less generous plan 

and pay less out-of-pocket.20,21 

•	 Health Reimbursement Arrangement (HRA). An 

innovative and flexible health plan design approved 

last year by the U.S. Treasury and IRS (Rev. Rul. 2002-

41 and Notice 2002-45), an HRA is a type of defined 

contribution account that may be used to pay both 

out-of-pocket health care expenses and health 

coverage premiums for employee and dependant 

health care, including long-term care coverage. 

Amounts credited to an HRA must be provided solely 

by the employer and cannot be financed through 

employee salary reductions, and any unused balances 

may be rolled over from year to year. These flexible 

plans may be provided by an employer in conjunction 

with a cafeteria plan as well as another health plan that 
 

 

 

 

 

 

 

 

Roundtable Discussion on Health Insurance Issues, pg. 4 

would be ordinarily financed through employee salary 

reduction.22 

• High Risk Pools (HRPs). The Trade Act legislation 

(H.R. 3009) passed in the 107th Congress and signed 

by the President in August 2002 provides up to $100 

million in federal funding for states to create high-risk 

pools or to fund existing ones. The Act enables 

offering uninsured people with pre-existing conditions 

access to affordable health insurance coverage. State 

risk pools first appeared 25 years ago and cover about 

153,000 people. Currently, 30 states have enacted 

legislation establishing HRPs. States with wellfunctioning high-risk pools have virtually solved the 

problem of health insurance access for their medically 

uninsurable residents.23 

The National Women’s Business Council is a bi-partisan 

Federal government council created to serve as an 

independent source of advice and counsel to the President, 

Congress, and the U.S. Small Business Administration on 

economic issues of importance to women business owners. 

Members of the Council are prominent women business 

owners and leaders of women’s business organizations. 

For more information about the Council, its mission and 

activities, contact: National Women’s Business Council, 

409 3rd Street, SW, Suite 210, Washington, DC 20024; 

phone: 202-205-3850; fax: 202-205-6825; e-mail: 

nwbc@sba.gov, web site: http://www.nwbc.gov. 

1 “Health Insurance Coverage 2001”, Current Population 

Reports, U.S. Census Bureau, September 2002. 

www.census.gov 

2 “Expanding Health Insurance: The AMA Proposal for 

Reform”, American Medical Association, 2002. www.amaassn.org 

3 “Employer Health Benefits: 2002 Annual Survey”, The 

Kaiser Family Foundation and Health Research and 

Educational Trust, 2002. www.kff.org 

4 “Affordability in Health Care: Trends in American MicroBusiness”, the National Association for the Self Employed, 

2002. www.nase.org 

5 “Study of the Administrative Costs and Actuarial Values 

of Small Health Plans” by Rose C. Chu and Gordon R. 

Trapnell, SBA Office of Advocacy, January 2003. 

www.sba.gov/advo 

6 “2002 Membership Survey of the National Association of 

Women Business Owners”, NAWBO, 2002. 

www.nawbo.org 

7 Center for Women’s Business Research. 

www.womensbusinessresearch.org 

8 National Women’s Business Council estimate based on 

the employment distribution of women-owned firms and 

the previously cited statistic that only 61% of small firms 

offered health insurance to their employees in 2002. 

www.nwbc.gov 

9 “National Agenda: Health Care”, National Federation of 

Independent Business, November 11, 2002. 

www.nfib.org 

10 “Association Health Plans: Improving Access to 

Affordable Quality Health Care for Small Businesses”, U.S. 

Department of Labor, December 2002. www.dol.gov 11 “MSAs Can Be a Windfall for All” by Greg Scandlen, 

Policy Backgrounder No. 157, November 2, 2001. 

www.ncpa.org 

12 “Medical Savings Accounts”, National Association of 

Health Underwriters. www.nahu.org 

13 “Archer MSAs: A Good Beginning—A Better Future” 

(Issues and Answers No.105), Council on Affordable 

Health Insurance, July 2002. www.cahi.org 

14 “White House Renews Call for Health Insurance Tax 

Credits” by Amy Snow Landa, AMNews, American 

Medical Association, February 18, 2002. www.amaassn.org 

15 “The Bush Health Agenda—Part II: Tax Credits for the 

Uninsured” by Mark McClellan, National Center for Policy 

Analysis (Brief Analysis No. 415), August 20, 2002. 

www.ncpa.org 

16 “Small Employer Health Insurance Purchasing 

Arrangements: Can They Expand Coverage?” by Elliot K. 

Wicks and Jack A. Meyer, National Coalition on Health 

Care, May 1999. www.nchc.org 

17 “Health Marts, A Free Market Health Care Solution” by 

Peter J. Ferrara, Policy Brief, Americans for Tax Reform, 

October 4, 1999. www.atr.org 

18 “Implementing a Cafeteria Health Plan” by T. Michael 

Regan, Physicians News, March 1998. 

www.physiciansnews.org 

19 “Consumer-Choice Health Purchasing Groups”, 

Institute for Health Policy Solutions, 1999. www.ihps.org 

20 “Health Insurance: Letting Employees Choose” by Greg 

Scandlen, Brief Analysis No. 325, National Center for 

Policy Analysis, July 6, 2000. www.ncpa.org 21 “Defined Contribution Health Insurance” by Greg 

Scandlen, National Center for Policy Analysis, (Policy 

Backgrounder No. 154), October 26, 2000. www.ncpa.org 22 “Defined Contribution Health Plans: A Greenlight for 

HRAs”, Kilpatrick Stockton, July 2002. www.kilstock.com 

23 “Getting Started: A State Checklist for Creating HighRisk Pools” (Issues and Answers No. 111), Council on 

Affordable Health Insurance, December 2002. 

www.cahi.org