DOVER - A plan to create a health insurance pool to help small businesses and families cleared a key hurdle when a legislative committee included start-up money for it in the state's operating budget, but the bill implementing the program floundered in the House of Representatives.

Insurance companies charge large corporations and governments lower premiums than they charge individuals or small businesses because the risk of significant payouts can be spread over more people.

The statewide pool aims to give businesses with a few employees or individuals the same access to lower premiums as large corporations and governments.

Rep. Donna D. Stone, R-Dover, a sponsor of the bill, said the measure died when the session ended July 1 because only $1 million was allocated in the state's budget.

The state's expenditures would stem from a provision requiring the state to reimburse the pool for 90 percent of the costs once a participant's bills reach $30,000.

"I think a lot of people's concerns were, 'What does this do but give people a lot of false hope,' " said Rep. Stone, chair of the House Economic Development, Banking and Insurance Committee.

Lobbyists for insurance companies BlueCross BlueShield and Coventry opposed the bill because of a section in the measure requiring the firms to participate in the pool program if they wanted to continue administering the state-government employee insurance plans.

Insurance Commissioner Matthew P. Denn, who said the estimated state expenses were predicted by three insurance firms, suggested the plan last year.

A. Richard Heffron, the state chamber of commerce's senior vice president of governmental affairs, said the bill was "one of the better options."

As costs continue to go skyward, he warned, a large national change in how health care is paid for might be needed to help businesses afford coverage for employees.

House Majority Leader Rep. Wayne A. Smith, R-Wilmington, said legislators balked at the legislation because pooling programs in other states had run into financial problems.

The $1 million set aside in this year's budget for the program, he said, would lead to greater spending in future years as the program expands.

Rep. Smith said cutting people off after $1 million would not work because as members of the public see others enrolled, they will want to be part of the pool, too.

"Its easy to say it is only $1 million now, but it could be like Medicaid in the 1960s, which started out as a nice thing to do and is now a huge piece of the budget," Rep. Smith said.

"You would build up the public's expectations for the program to the point where it would take funding away from schools, health care and parks and other things you would like to have."

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