Bridging Small Firms’ Health Insurance Gap : Workplace: The state Legislature will address bills to shrink the number of workers without protection.

Rose Marie Rodriguez employs 60 people in a small Long Beach firm that provides care for the sick and elderly. But most of her employees, many of them single mothers, don’t have health insurance for themselves.

As a former nurse, Rodriguez feels bad that she is not providing health insurance for her employees at In-Home Quality Care Inc. and has been shopping--without success--for rates she can afford. The policies she’s looked at so far carry significantly higher premiums for her firm than those for large corporations.

Now, Rodriguez is worried about proposed legislation that could force her to buy insurance she says she can’t afford. Laws mandating coverage by all employers, Rodriguez said, “could easily break my company.”

Such sweeping reform requiring all employers to provide insurance is probably more than a year away, if it comes. And political momentum is building at the state and national level for major changes to broaden access to health insurance.

Because insurers and business groups want to head off government-mandated controls--which they fear could come up soon--they are pushing hard for legislation that would at least incrementally extend access to millions of uninsured workers. A spate of bills has been proposed at the state and national level, and a couple are considered to have a decent chance of passing the California Legislature in the session starting later this month.

“There is a recognition (that) reform is necessary because the market has gotten into abusive practices that need to be fixed,” said Kathleen Murphy, counsel to Aetna Life Insurance.

Insurance companies across the country and other state governments are watching California because what happens in its huge market could set precedents nationwide. The issue is especially pressing in Los Angeles County, where it is estimated that nearly a third of the population has no health insurance.

Small businesses, workers and public interest groups will have an opportunity to argue their positions on the California proposals in Los Angeles on Tuesday at a hearing convened by Insurance Commissioner John Garamendi. The hearing begins at 10 a.m. at Queen of Angels Hollywood Presbyterian Medical Center.

When the Legislature reconvenes Aug. 19, it probably will debate a number of bills on health insurance reform.

Garamendi is pressing for reforms that would require the following:

* Guaranteed issuance. Insurance firms that sell policies to small firms would have to insure any small company requesting insurance.

* Guaranteed renewal. Insurance firms could not refuse to renew insurance, rate increases would be limited.

* Community ratings. Returning to charging comparable premiums to firms in a broad geographic area, regardless of their type of business or history of employee illness to help spread risk and reduce costs to many small firms.

* Risk pools. A system in which the state would group small companies of several hundred or several thousand employees and allow private insurers to bid for the job of insuring them. The cost of insurance would be paid by the companies and their employees and might require rate increases for some existing policyholders to support the higher costs.

These changes could provide a safety net to employees of small companies now unable to get health insurance. “There are insurance companies that won’t even look at us,” Rodriguez said.

And even if she could get insurance, there is always the danger that if even one employee gets seriously ill and starts racking up bills, her insurer could try to dump her company by increasing rates--sometimes twofold or threefold in a year.

Large as well as small firms are concerned about the impact of the uninsured on local business. The Los Angeles Chamber of Commerce recently issued a position paper arguing for insurance reform in part because the cost to the county and state of treating indigents in public health-care facilities is draining resources from education and other badly needed infrastructure improvements.

Inequities in the insurance system “are a drain on the entire business environment,” argued Julia Thomas, chairwoman of the chamber’s health issues committee.

Ernestine Wright is one worker who must depend on county resources because she lacks insurance. Wright, 62, worked for Rodriguez’s firm as a home health-care aide until last January, when her heart condition forced her to stop work. Without insurance, she doesn’t know whether she’ll be able to afford the care she needs.

“I’m afraid. I pray every day, ‘God help me. Get me through to 65,’ ” Wright said.

At that age, she will be eligible for Medicare. But until then, she’s stuck like millions of other working poor--those neither old enough nor indigent enough for government assistance.

Wright, who lives in a trailer home in Long Beach, takes home $225 a week when she’s able to work. Several years ago, she was paying a large chunk of her salary--$101 a month--for Traveler’s health insurance but became unable to keep up with payments. The insurance didn’t do her much good anyway because it didn’t pay for treatment of her high blood pressure, a “pre-existing condition” when she signed up for the policy. Her blood pressure medicine costs her $150 a month.

“If I get really sick, I guess I’ll be out on the street,” she said.

It is particularly hard for health-care workers such as Wright to get insurance because they are considered high risks by insurance firms in part because of their possible exposure to diseases. Other occupational groups that many insurance companies avoid include heavy-equipment operators, maids, models, doctors, lawyers and rodeo performers. Although discrimination against individuals is not allowed, discrimination against groups is not illegal in health insurance.

“Any employer in a group which insurers suspect there are a large number of gay men will have a hellish time getting insurance” because of the perceived risk of AIDS, said Walter Zelman, special assistant to Garamendi. So thousands of Southland hairdressers, florists and waiters go without insurance because of stereotypical attitudes about those jobs.

Los Angeles County has a higher proportion of uninsured workers than any other metropolitan area in the country, largely because the economy depends so much on small businesses. Ninety-five percent of Los Angeles businesses employ fewer than 50 people. And fewer than half of all small businesses provide health insurance for their workers. Of the 2.7 million residents without insurance here, nearly 90% are people with jobs--most at small firms--and their families, according to a recent UCLA study.

And those without health insurance are often those that need it most or can least afford to pay for it themselves. “The present insurance system means those who are most needy are paying the most,” Zelman said.

Employees of small businesses often are paid less than their counterparts at large firms and can’t afford higher premiums. Studies have shown that small businesses employ more women and old people, who generally have higher health-care needs. And small businesses on the edge of survival also can’t afford to pay rates that can be double that of the bigger firms.

Rodriguez said she’s already paying for workers’ compensation insurance equal to 9% of her payroll. Buying health insurance could raise her total insurance costs to well over 20% of what she pays in salaries. The tax system, too, is stacked against small companies--large corporations get tax breaks on 100% of the health insurance premiums they pay, while unincorporated firms can deduct only 25% of their insurance costs, according to the Los Angeles Chamber of Commerce.

Rodriguez also can’t resort to a cost-saving measure used by many large and medium-sized companies--”self-insurance”--a system by which employers hire insurance companies to administer claims but actually take on the risk of paying the claims themselves. And she finds that her lack of insurance makes it harder to compete with large, well-insured firms for quality employees.

Some insurance companies are starting to increase access for small firms. Since last year nonprofit Blue Cross of California has been promoting a program to get insurance to firms that previously couldn’t afford it. It is offering insurance to high-risk small employers (in dangerous professions or with seriously ill employees) at rates 1.3 times that of ordinary policyholders. That’s a relative bargain by existing standards. Although Blue Cross will not take every high-risk company that employs high-risk individuals, it allows agents to sell one high-risk group policy for every four ordinary-risk small firms. Renewal is guaranteed, with limits on rate increases.

By contrast, industry analysts say, some other insurance companies are “cherry-picking”--skimming off the most healthy, cheap individuals and groups to insure. That means insurance companies firms that accept higher-risk groups have fewer healthy premium-payers to support their costs.

“I had a major insurer tell me he was embarrassed the way his company was doing business (excluding high-risk groups). But he said they couldn’t change unless the rules applied to everyone,” Zelman said.

Zelman said that those currently insured could pay more with the reforms and that some consolidation in the insurance industry may be necessary. “There is a risk some smaller insurers will have trouble. But to the extent that some firms avoid high-risk cases, society at large has a problem. I don’t think whether you get health care should be determined by whether you’re employed by a big company or not.”

* PERSONAL FINANCE: A look at choosing health plans. D4