Small Business Commission

October 21, 2008

The Commission met in Richmond and was presided over by the Commission's co-chairmen, Delegate Jeffrey M. Frederick and Senator W. Roscoe Reynolds.

Presentations

The Honorable Marilyn B. Tavenner, Secretary of Health and Human Resources
Secretary Tavenner presented an overview of the VirginiaShare Health Insurance Program. VirginiaShare was designed to provide affordable health insurance to over 6,000 small businesses and 15,000 low-income, uninsured employees in Virginia. Small businesses that employ between two and 50 employees and employees of these businesses who were working at least 30 hours per work, have not had health insurance during the past six months, and who earned less than 200 percent of the federal poverty level would have been eligible to participate in VirginiaShare.

Secretary Tavenner then described the mechanics of VirginiaShare. The program would subsidize the purchase of health insurance under a three-share financing approach in which the employer, the employee, and the Commonwealth would pay one-third of the monthly insurance premium. It was expected that each party's share would be approximately $60 per month.

VirginiaShare was proposed by the Governor as a pilot program in which state funds would be used in conjunction with funds provided by the Riverside Foundation to pay for the subsidy. Secretary Tavenner noted that although the VirginiaShare program was ultimately not enacted, the Riverside Foundation has continued with a version the program, committing $1,000,000 over two years.

Delegate Daniel W. Marshall III
Delegate Marshall spoke to the Commission about "mandate-lite" health insurance policies. "Mandate-lite" policies are insurance policies that are not required to provide coverage for some or all of the mandated health insurance benefits contained in the Virginia Code.

In 2007, Delegate Marshall introduced House Bill 3160 which provided for the sale of "mandate-lite" policies, but placed certain restrictions on them. The "mandate-lite" plans would only be available to small businesses who employ between two and 50 employees. Delegate Marshall also noted that in order to prevent employers who currently offer more comprehensive health insurance from replacing those plans with a "mandate-lite" policy, only employers who had not offered health insurance during the preceding six months would be eligible to purchase such policies. Delegate Marshall explained that his bill would allow the insurance companies to determine what mandated benefits should or should not be included in the "mandate-lite" policies.

In response to Delegate Oder's question regarding who would be opposed to offering "mandate-lite" plans, Mr. Mark Pratt of Anthem Blue Cross and Blue Shield stated that the interest groups who supported each individual mandated benefit as well as the providers who administer those benefits would be the likely opposition. Senator Barker expressed concern that businesses that offered "mandate-lite" policies would have no incentive to move up to more comprehensive coverage.

Delegate Oder moved that the Commission endorse Delegate Marshall's bill in concept, but delay a final vote until those opposed to the bill could be given a chance to speak at the next meeting. Delegate Janis offered a substitute motion, which passed, that the Commission vote to endorse the bill in concept.

Doug Gray, Executive Director of the Virginia Association of Health Plans also spoke to the Commission about "mandate-lite" policies. He noted that other states allow the sale of such policies and have met with varying degrees of success. Mr. Gray also stressed that the effect of "mandate-lite" policies on premiums and the potential marketplace for plans were unknown. He stated that there are concerns that the cost to administer plans may exceed the potential size of the marketplace.

Stephen W. Bowman, Joint Commission on Health Care
Stephen Bowman made a presentation on Section 125 plans. Mr. Bowman explained that Section 125 of the Internal Revenue Code enables employees to purchase health insurance policies with pre-tax dollars and may allow for employee savings between 25 and 40 percent per dollar contributed toward health insurance. Such plans may also result in a decreased tax liability for employers through lower payroll taxes as employees' use of pre-tax dollars serves to reduce the employer's taxable payroll.

Mr. Bowman noted that there are some limitations on Section 125 plans. These plans make health insurance more affordable, but will not help employees who do not make enough to afford insurance. Additionally, employers who pay 100 percent of the insurance premiums for their employees cannot benefit from these plans.

Mr. Bowman stated that in Virginia, 58 percent of employers with less than 50 employees do not offer Section 125 plans while only eight percent of employers with more than 100 employees do not. Mr. Bowman then addressed why more businesses have not adopted Section 125 plans, citing a lack of knowledge of their existence, a misperception of the cost, time and administrative burden in establishing plans, and the possibility of tax consequences if the plan is not correctly set up.

Mr. Bowman then presented several policy options for dealing with Section 125 plans that will be considered by the Joint Commission on Health Care at its meeting held on November 24, 2008. The Commission agreed to consider the recommendations made by the Joint Commission on Health Care and directed staff to work with Mr. Bowman in preparing a letter to the Department of Human Resources Management that will be considered at the Commission's next meeting. Lynda Sharp Anderson, Director of the Virginia Department of Business Assistance, stated her willingness to cooperate with posting information relating to Section 125 plans on its business portal website.

Member Discussion and Work Plan

In addition to its directions concerning "mandate-lite" insurance plans and Section 125 plans, the Commission considered a motion that it resolve that no additional insurance mandates should be enacted during the 2009 Session of the General Assembly. This motion was adopted.

Next Meeting

The Commission plans to hold one more meeting prior to the start of the 2009 Session of the General Assembly. The next meeting date will be posted on the Commission’s website and the General Assembly website as soon as information is available.

Chairman:
The Hon. W. Roscoe Reynolds
The Hon. Jeffrey M. Frederick

For information, contact:
David Cotter, DLS Staff

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