Md. program helps small businesses provide health insurance for workers

August 30, 2008|By ARNOLD S. PLATOU

WASHINGTON COUNTY -- Despite the economy, Maryland is betting its new Health Insurance Partnership for small businesses will be popular.

Ellen Valentino, state director of the National Federation of Independent Business, is convinced many will sign up fast.

"We think it's going to go quick," Valentino said. "... This is a program that I think makes absolute sense for small-business owners who currently don't have insurance."

The new program, proposed by Gov. Martin O'Malley and adopted by the Maryland General Assembly, is designed to help small businesses provide health insurance for their employees.

Statewide, there are 64,000 employers with fewer than 10 employees, according to the Maryland Health Care Commission. About 37,000 of them do not offer health insurance, the commission said.


The state hopes to enroll 1,500 of them in the new program this year, using $15 million it has set aside to pay up to half of each insurance premium.

Maryland is allowing signups starting Sept. 9 and will begin subsidizing the insurance premiums Oct. 1, Dr. Rex Cowdry, the commission's executive director, said during a meeting in Hagerstown last week.

How the program works

The program -- described in detail on the commission's Web site at -- provides an incentive for businesses with between two and nine workers to offer health insurance.

Firms must not have offered health insurance to their employees within the past 12 months and they must meet wage requirements. Family coverage also can be subsidized.

Coverage and renewal are guaranteed, and there are no pre-existing condition limitations, Cowdry told about 30 small-business owners and insurance agents at Tuesday's informational meeting.

Cowdry said the trade-off is that at least 75 percent of the eligible employees must sign up.

Thus far, four major carriers have agreed to sell insurance under the program, Cowdry said. They are CareFirst BlueCross BlueShield, Aetna, United Healthcare and Coventry Health Care.

And several different levels of coverage are available, he said.

"You get up to 50 percent (of a premium's cost) or the maximum established by the commission, whichever is lower," said Nicole Stallings, chief of government relations and special projects for the commission.

"The subsidy goes to both -- the employer and the employee -- based on the contribution each makes toward the cost of the coverage," Stallings told a reporter earlier.

Let's say the business is Joe's Diner and the annual premium for employee-only coverage is $3,000.

"If we decide Joe's Diner gets $1,500, the state is going to give $1,500 to, say, Carefirst," Stallings said. "Carefirst is going to take that annual amount that Joe's Diner owes and subtract it so that when that employee gets that bill, they're going to see the deduction."

So if the employer contributes $1,000 of that remaining cost, the employee only has to pay $500 -- and that's how both would benefit, she said.

The percentage the state will subsidize depends on each firm's average wage. The average can't be higher than $50,000. When the percentage is determined, everyone -- "the owner and the waitress" -- gets the same amount of subsidy, Stallings said.

And if the business adds more employees or if their wages increase, the premium will not change during a plan year, and new employees will qualify, Stallings said.

"We want a business to be able to grow," she said.

Effect of the economy

Cowdry said that when a business grows to 10 workers, the following year, "the subsidy starts to decline until it fades out as you reach 20 employees." In all, 19 people is the most employees a business can have and still get a bit of subsidy.

He also discussed the merits of using a "125" plan, through which employee payments are deducted from his or her paycheck before the income is reported to the Internal Revenue Service -- so the payments are not taxed.

"It also means it's a benefit for you as an employer because you, the employer, no longer pays Social Security or Medicare taxes and unemployment taxes on the premium amount," he told business owners.

And, important to Western Maryland businesses because West Virginia and Pennsylvania are nearby, "you're eligible and we'll cover all your employees, even those two or three who live outside the state," Cowdry said.

For help signing up, Cowdry urged owners to contact insurance agents who specialize in writing small business policies. Application forms can be downloaded from the commission's Web site.

Stallings said signups will be taken on a first-come, first-served basis.

"We expect that program to reach its capacity," she said. "It's going to be a successful program, and I hope it expands."

Nonetheless, she conceded, given the economy's continuing weakness, it's probably not the best time to be asking employers to add another expense.

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