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LONG ASSOCIATED with socialism, universal health insurance for decades has only been whispered about in legislative back alleys.

But recently politicians have resurrected it, sparking a heated debate in the small business community.

Proposals that call for government-mandated health benefits for all are making their way through the U.S. Congress and State Assembly. A few years ago, most politicians wouldn't have dared to talk about such ideas -- which once were termed the "first step toward communism."

However, skyrocketing insurance premiums and the fact that more than 37 million Americans have no medical benefits has forced legislators in Washington and Albany to reconsider universal health insurance.

"Despite its successes, our current system of private and public programs cannot match the job," State Health Commissioner David Axelrod said last September, when he proposed that the state offer basic medical insurance to all residents.

"Chronic gaps in coverage constantly reappear, competitive pressures force insurers to avoid the truly sick and new challenges like AIDS threaten to overwhelm the system," he said, explaining an estimated 2.5 million state residents currently have no health insurance.

Axelrod's plan, known as Universal New York Health Care (UNY-Care), would require all businesses in the state to provide insurance or pay a tax enabling the state to pay for the insurance.

Each New Yorker would be given a health-care card, and the person's private insurer would be billed for hospital costs. If the person has no insurance, it would be billed to a state-run program, Ronald L. Rouse of the state Health Department said during a recent speech in Buffalo.

UNY-Care also would give the state broad powers to set prices and reimbursement rates for health care, he added.

"With UNY-Care, we're tying to de-emphasize the financial relationship between the doctor and patient, and re-emphasize the medical relationship," Rouse said before a group of entrepreneurs at a forum organized by the Council of Small Business Enterprises, a division of the Greater Buffalo Chamber of Commerce.

Many small business advocates have attacked UNY-Care as a utopian dream that will drive entrepreneurs from New York. They say such a health-care system would increase the cost of doing business and give competitors in other states an unfair advantage over New York-based industries.

"The UNY-Care plan would succeed only in creating another costly bureaucratic apparatus, increasing unemployment, and making it tougher to start a business in New York," said Mark P. Alesse, state director of the National Federation of Independent Business.

Rouse disagreed, pointing out that the state currently spends about $11 billion a year for health care. The number of New Yorkers left uncovered by health insurance, according to the Health Department, jumped by 41 percent between 1980 and 1986, he added.

The UNY-Care plan is expensive, Rouse said, but over the long haul it will pay for itself by putting an end to spiraling health-care premiums and huge bills incurred by the state from uninsured residents.

Funding schemes for UNY-Care range from a bare-bones plan that would cost the state under $100 million to a more extensive plan that would cost $700 million. The state also would tap a $1.1 billion bad debt and charity pool for uninsured New Yorkers.

Under the plan, private insurers would only be liable for up to $25,000 in health-care costs. The state would pay for expenses over this amount.

"The potential problems with UNY-Care are so serious that they dramatize all the more how important it is to try, first, to make it easier, rather than harder, for employers and workers to afford health insurance," said Daniel B. Walsh, president of the Business Council New York State.

The council has estimated that despite the reduced expenditures from paper work that Rouse claims will occur with the plan, UNY-Care still would cost employers an additional $3 billion to $4 billion per year, and taxpayers an additional $2 billion to $3 billion annually on top of that.

Lobbyists Walsh and Alesse say UNY-Care's bill will be an economic drain on the state and will result in significant job losses. Assemblyman Robin Schimminger, D-Kenmore, agrees, proposing an alternative to UNY-Care that would help those with no medical benefits without damaging entrepreneurs' competitive edge.

Schimminger, the chairman of the Assembly's Committee on Small Business, and State Sen. John McHugh, R-Watertown, plan to introduce a bill within the next few weeks that would allow small businesses to purchase for their workers a low cost, basic form of health insurance that would be supported by state tax credits of up to $30 per month for every insured employee.

"Many small businesses choose not to provide health insurance to their employees because they can't afford it," Schimminger said. "With this plan they could provide their workers with good, basic coverage."

A recent study by the National Federation of Independent Business found that 64 percent of the state's small businesses provide health benefits to their workers. Of those that don't, 50 percent said they would if the costs could be lowered by 20 percent.

Under current state law, the Schimminger-McHugh plan is illegal, because it isn't comprehensive. Albany requires that health insurance packages cover a variety of special illnesses and diseases in addition to commonplace ailments.

"In effect, where insurance is concerned, you have to buy the very best, or you can't buy anything at all," Alesse of the NFIB said.

The Schimminger-McHugh plan would affect businesses that employ less than 100 people and have annual sales under $10 million. The Kenmore legislator stressed that his plan is voluntary and is meant to be an alternative to UNY-Care.

Regardless of whether or not they support universal health care, politicians and business advocates agree that it will dominate this legislative session.

On March 7, a group of Western New York entrepreneurs plans to lobby their representatives in Albany about health insurance and other issues of concern to the small business community, said Harold Connor, COSBE chairman and president of Business Computers & Software Co. in Williamsville.

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