With the ink barely dry on a new state law that allows small-business owners to form and join health care cooperatives, interested citizens have their wheels turning on how to maximize the boon.

The law, signed by Gov. Phil Bredesen near the end of the legislative session in late May, provides business owners the opportunity to negotiate better health insurance rates, including the option to shop for better rate predictability and stability.

While it does not guarantee lower premiums, the law represents an option for small employers who struggle with offering health insurance because of high rates. The law defines a cooperative as at least 1,000 employees or 10 employers. It takes effect in January.

“The thrust of the legislation is to help small-business owners by giving them an option to spread their risk among a pool and to help protect their business during those years when they are experiencing catastrophic illness,” said Jim Brown, state director for the National Federation of Independent Business (NFIB), emphasizing that catastrophic incidents drive up premiums.

“It is extremely difficult for small business to deal with a 60 or 70 percent increase or large increases greater than the rate of inflation,” he said.

Some relief for the weary

It’s no secret health care costs have become a burden across all segments of the economy.

Fifteen years ago, 70 percent of businesses offered health insurance to employees. Last year, that number dropped to only 45 percent.

“When you get to businesses with one to three employees, the number is lower than 45 percent,” Brown said. “The smaller the employer, the worse the situation.”

Debates still flare over the efficacy of health care pools, but for now, the interest is high not only on the business side, but with legislators.

State Rep. Curry Todd, R-Collierville, was one of the supporters.

“I believe it’s because of the number of small businesses in West Tennessee and that folks are looking for opportunities to expand health care coverage,” Todd said.

Legislators joined with NFIB, large insurers and businesses to study a similar bill recently passed in South Carolina, which provided common ground for discussion and compromise.

Todd said he believes the bill passed with little resistance for several reasons: “I think this is another deterrent because costs are prohibitive. Also, it’s the first time we’ve seen a major push, and the first step is just to get it on the books.”

Brown said before the governor signed the bill into law, four to five major insurers came to the table. At this juncture, a general consensus is the new law at least represents a good first step.

The most significant compromise can be found in the amendment that now defines a small employer as having no less than two, but no more than 50 employees.

Since Bredesen’s signing, Todd and Brown have reported positive feedback from members, constituents and businesses.

“I think this will also offer affordable coverage for businesses that are looking to retain employees, which is even more important in this market,” Todd said.

Health care associations have existed and are created at the state level, but a national pool could offer additional incentives for joining.

“If a state does offer a pool, businesses could qualify for a tax credit of $1,000 for an individual and $2,000 for family coverage,” Todd said. “That would serve as yet another incentive for small employers to join.”

Brown said business owners can find out about pools through their chambers, the NFIB and industry associations.

“Our approach is to continue to have conversations with parties who have an interest and want to know more.”

To learn more about House Bill 4066/Senate Bill 4014 and amendments, visit www.nfib.com or www.legislature.state.tn.us.