If health care reform proposals were precipitation, there’s an 80 percent chance that any particular state legislature will be showered with them in 2007. A number of states are looking seriously at major measures to expand coverage and reduce the number of uninsured. And many of their proposals are going to affect employers. Here’s a look at those measures which, at an early point in the year, appeared to carry the greatest likelihood of requiring employer participation or contributions.

On Jan. 17, Pennsylvania Gov. Edward Rendell unveiled the Cover All Pennsylvanians (CAP) program, which would offer affordable basic health coverage to small businesses (fewer than 50 employees) and the uninsured. Small employers would be eligible if they haven’t offered health coverage in the past six months, and if their employees earn less than the state average annual wage of $39,000.

Their premiums would be approximately $130 per employee per month; employee contributions would be calculated on an income-based sliding scale. All uninsured adults, regardless of their employer, would be able to receive CAP coverage, with subsidies for those who earn 300 percent of the federal poverty level or less. Employers that don’t insure their employees would be subject to an assessment of 3 percent of payroll, which would be used to help pay for the program. In the first year of the assessment, employers with fewer than 50 workers would be exempt. The program would focus on patient safety by trying to eliminate hospital-acquired infections and by targeting avoidable medical errors.

“Our reaction is mixed,” said Brian Kelly, director of government affairs with the Pennsylvania Chamber of Business and Industry. “We think that some aspects of the proposal have merit, like the focus on hospital-acquired infections. But we still have concerns, primarily about the payroll tax. How will it affect larger employers and self-insured companies? What about part-time or seasonal employees? How will it be paid for and administered?”

Is California dreaming?

In California, a more widely publicized proposal of Gov. Arnold Schwarzenegger would tax employers 4 percent of payroll if they have more than 10 employees and don’t provide medical coverage. The money would go into a state fund that would subsidize coverage for the working uninsured. Premiums would be calculated on an income-based sliding scale. If enacted, the plan would cover 6.5 million uninsured Californians.

“The California Chamber hasn’t taken a formal position yet on the proposal, as we are awaiting further detail from an actual bill,” said Vince Sollitto, a spokesman for the California Chamber of Commerce. “We’re still analyzing how the proposal will work and what its full effect will be on our state’s health care system and on businesses that provide health insurance.

“At this point, we’re concerned about its potential effects, especially whether new taxes on providers will be passed on to businesses, and whether it might create another under-funded government program, since the proposed revenue stream may be insufficient to keep up with health care inflation. We look forward to learning more about what the effects may be and to participating in the legislative process,” said Sollitto.

Recommendations in Illinois

The Illinois Adequate Health Care Task Force, commissioned by lawmakers, recently released its final recommendations, which would require all individuals to get health coverage and would provide state-funded premium subsidies for those under 400 percent of the federal poverty level. Employers would pay a per-worker assessment to cover part of the state’s cost in providing premium subsidies. Those that provide coverage directly would receive a credit against this assessment. The plan would spread the costs among employers, employees and taxpayers. If enacted as proposed, its backers say, it would cover the vast majority of the state’s uninsured.

“There was no business representation on the task force,” said Jim Nelson, vice president of communications and marketing with the Illinois Manufacturers Association. “Their plan would be paid for with a $1.4 billion tax on employers in the first year alone. That $1.4 billion could increase, because the plan doesn’t address cost escalation. At this point, though, it’s just a plan. The governor hasn’t embraced it, but it will be a starting point for debate in the 2007 legislative session.”

Other states get in on the act

In Maine, a Blue Ribbon Commission has been revisiting the financing of a significant health care reform enacted in 2003. Until now there has been no mandatory employer participation and no employer contribution, but now the commission is proposing to require a payment of $365 per year, per full-time equivalent employee from all employers of 10 or more that either don’t offer coverage, or offer it and don’t pay at least 50 percent of the premium.

The Missouri departments of Social Services, Health and Senior Services, and Mental Health are proposing to transform Medicaid into MO Health Net, which would build on the employer-sponsored system and encourage small-employer participation by offering premium offsets to those whose workers earn below 200 percent of the federal poverty level. Approximately a third of the cost of the program would be from state general revenue and matching federal funds. These funds would be used to leverage the remaining funds from employers and their employees.

In addition to those state proposals which at the moment would affect employers financially, a number of other states are considering developing health care clearinghouses that would give employers and employees access to affordable coverage. These clearinghouses are modeled on a feature of the Massachusetts reform law of 2006, which created a connector to provide access to coverage for small employers and uninsured individuals.

In Minnesota, for example, Gov. Tim Pawlenty would create a Health Insurance Exchange, designed to open coverage, streamline administrative responsibilities and reduce paperwork by allowing employers to designate the exchange as their health plan. Similarly, Louisiana proposes to create a clearinghouse called the Health Insurance Connector, Maryland a Health Insurance Exchange, and Michigan a conduit via the Michigan First Health Care Plan.

Michigan Gov. Jennifer Granholm described these entities as “doors” to coverage. Until now, she said, most health coverage in the United States has been available through two doors: employer-sponsored coverage and coverage provided by a government program such as Medicare or Medicaid. The new exchanges and connectors would provide “a third door.”

Three states inspire others

The fact that these reforms are building on the Massachusetts Connector underscores a common factor in the proposals now on lawmakers’ tables: They were inspired and emboldened by the three states—Massachusetts, Vermont and Maine—that recently took the initiative to address this complex problem.

“State lawmakers are looking at Massachusetts, Maine and Vermont, and they see an impetus for the possibility of hope,” said Enrique Martinez-Vidal, acting director of State Coverage Initiatives. This is a project of the Robert Wood Johnson Foundation, which works with states to expand coverage.

“Massachusetts and Vermont have put themselves out there,” agreed Laura Tobler, health program director for the National Conference of State Legislatures. “That starts a trend. It elevates the priority in other states.”

“There’s a combination of factors at work here,” Tobler continued. “The problem of the uninsured isn’t going to go away. The number of uninsured continues to rise; the number of employers offering coverage is declining; the number of people moving into employment that tends not to offer coverage, such as retail and service jobs, is increasing; and employers are requiring a greater level of cost sharing.

“States are in a good situation revenue-wise, compared to several years ago. They may have some money they can move, and they’re looking for ways to spend it,” Tobler stated. “The federal government is becoming more welcoming of the expansion of Medicaid, using it to cover more of the uninsured. There’s no consensus in Washington, so states are moving forward.”

Recent actions have shown that governors and state legislators are willing to cross party lines to get things done. In Massachusetts, a Republican governor and a strongly Democratic legislature passed a reform law by working together. Leaders are looking at health care as a bipartisan issue.

However, Jennifer Tolbert, a principal policy analyst with the Kaiser Family Foundation, offered a word of caution. “There’s a lot of excitement right now, but these are just proposals. It’s going to be a lengthy process.”

“But there’s a good possibility that something will happen,” countered Martinez-Vidal. “There’s a huge groundswell at the government and legislative level. States have been left at the front line, and they need to do something. Employers are concerned about the uninsured. They want to have a healthy population—employee health affects productivity and profitability. What these proposals have done is ask all players for some level of sacrifice in the name of the greater good.”

“These are efforts to build on, and shore up, the existing employer-based system,” added Tolbert. “They’re developing more affordable plans for employers and individuals. But also, they’re relying on employer participation [and are] requiring employers to pay penalties for not participating. So there’s both a benefit and an expectation for employers. It cuts both ways.”

Employers have a role to play in making these changes effective. “If you haven’t been active recently in communicating with your state representatives about your views on health care, I would strongly encourage [you] to do so this year,” said Bob Carragher of the Society for Human Resource Management’s Governmental Affairs Department. “Many states have given up waiting on Washington to find a solution to this problem. State legislators need to consult and work with the employer community in developing legislative proposals to address the rising costs of health care.”

Diane Cadrain is an attorney and has been covering workplace legal issues for 20 years. She is a member of the Human Resource Association of Central Connecticut.