Connecticut recently passed a package of reforms designed to change fundamentally the small-employer health-insurance market. The reforms are aimed at businesses with 25 or fewer full-time employees. In those groups insurers can't spread losses over large numbers -- so they often refuse to cover high-risk workers or raise prices dramatically after a big claim.

Not anymore in Connecticut. Among other provisions, the new legislation prohibits insurers either from excluding anyone from coverage for health reasons or refusing to offer or renew policies because of a customer's claims history. In addition, no business's premium may be more than twice the new business rate for a similar business, and it may not increase more than 20% above the average annual hike. The legislation also creates a pool for high-risk individuals, in which insurers will share losses.

The reforms are much like those suggested by the Health Insurance Association of America -- and according to the HIAA, at least eight other states are studying similar reforms. Such legislation "is a real innovative way to go," says one Connecticut small-business lobbyist. Then again, if the reforms don't lead more small businesses to offer coverage, that will fuel arguments for mandating health insurance.

-- Martha E. Mangelsdorf