Gov. Jerry Brown signed into law a bill on October 9 that will help lower the cost of health insurance for small businesses. In this economic climate, when small businesses need every extra dollar they can find to grow their businesses and stimulate the economy, Gov. Brown couldn’t have made a better move.

Brown’s signature on SB 51 brings California into compliance with the medical loss ratio provision of federal healthcare reform. Small businesses spend on average 18 percent more than large businesses for comparable health insurance, largely because of high administrative costs, which can total as much as 30 percent of premiums. SB 51 requires insurers to spend at least 80 percent of small businesses’ premium dollars on patient care instead of administrative costs or executive compensation. This helps keeps a lid on small businesses’ premium costs, allowing employers to keep more of their money where it belongs—in their pockets—so they can expand their companies and create jobs.

California’s enactment of SB 51 is a big step toward leveling the playing field for small businesses, and can help lead our state toward successful implementation of the Affordable Care Act. By putting a cap on medical loss ratios, the bill will help close the 18 percent gap between coverage costs for small and large businesses. With increased savings, small business owners can grow their businesses, and with them, our state’s economy.

An additional benefit of SB 51 is that it requires insurers to provide a rebate to their policyholders if they spend less than the required amount on healthcare services, which means small businesses will have extra cash to invest in expansion and job creation.

The Governor’s signature on SB 51 gives small businesses a guarantee of value for their premium dollars, which is something every employer can be happy about. This will help bring down costs, which will put coverage within reach of more small businesses and their employees, thus giving more people access to better medical services, such as preventive care. Lowering the cost of insurance for small businesses will allow them to spend more money on growing their businesses and putting the economy back on the road to prosperity.

Learn more about this law and other components of the Affordable Care Act at