In "Legislative Agenda: 2007" by Michael Ciamarra, Alabama Policy Institute, we supported a plan that would seek a common-sense, affordable coverage that would encourage small businesses to provide health insurance. I am very pleased that Alabama’s Gov. Bob Riley has put forth a very serious proposal that we believe will begin to change the dynamics of the health debate in our state.

In Alabama 93% of privately insured individuals receive heath insurance coverage through their employer.

Unfortunately, statistics show less availability of employer-sponsored health insurance among small businesses. In Alabama, 28% of small business employees do not have access to employer-sponsored health coverage, compared to just 1% without such coverage options in larger companies.

Due to these limitations and increasing cost, 52% of individuals working for firms with less than 25 employees are uninsured. In 2006, employer health insurance premiums increased by 7.7% - two times the rate of inflation.

As insurance premiums increase, more and more employees are declining to participate in employer-sponsored health insurance plans. A recent national survey found that 11% of small business owners who currently offer health insurance are considering dropping their benefit plans in the future due to rising costs. People without health insurance through an employer are more likely to go uninsured, leaving the state to bear the burden of exponentially increasing costs through state programs like Medicaid and SCHIP.Survey research indicates that small business owners would be more likely to provide heath insurance if tax incentives were offered.

A 2002 Small Employer Health Benefits Survey conducted nationally by Employee Benefit Research Institute found that 71% of employers would be much more likely or somewhat more likely to seriously consider offering health benefits if tax incentives were offered.

A recent study done by the NFIB in Alabama found that 90% of independent business employers support legislation that would provide a tax incentive for small businesses that provide health insurance.

Gov. Riley’s proposal will begin to close the gap between large companies and small business by creating strategic, targeted incentives for small businesses to provide health insurance to their employees.

The tax incentive would allow small business owners to deduct from their state income taxes twice the amount they pay for health insurance premiums. The deduction would be available to businesses with fewer than 25 employees.

Employees of small businesses could also deduct twice the amount they contribute to premium payments. This deduction would make employer-sponsored health insurance more affordable and encourage greater employee participation.

To qualify for the deduction, an employee must have an adjusted gross income of less than $50,000.

This measure represents a focused plan to decrease the number of uninsured in Alabama by increasing the availability and affordability of employer-sponsored health insurance among small businesses. Moving the uninsured into employer health plans ultimately lowers health care costs borne by the taxpayers. The tax incentives would be phased in over 5 years and would save the taxpayers between $12 and $16 million annually.

To prevent revenue loss in times of economic downturn and preserve education funding, Gov. Riley’s proposal contains a revenue growth guarantee. The next phase will not go into effect until 3% estimated growth in the Education Trust Fund has been certified by the state’s Department of Finance.

Targeted tax incentives like these lead to economic development and new jobs, which in turn generate revenue for education. These incentives should be viewed as long-term investments in our state and its hard-working citizens. The effective date will be for tax years beginning after December 31, 2009.

The need is great, the time is now. Can any of our SPN colleagues offer constructive feedback to improve and strengthen this proposal?