|
AHPs could increase small business buying power
Presidential backing gives lobbyists hope
By Matthew French
Staff Writer
When President Bush specifically addressed Association HealthPlans in his State of the Union address earlier this year, small business lobbyists nationwide stood up and cheered. The cost of health insurance is often the most difficult expense for business owners to cover; it’s so difficult, in fact, that more than 40% of businesses with between one and nine employees don’t offer health care coverage.
But Bush’s recent proposal to initiate Association Health Plans could end that. The cost of health insurance is often greater for small businesses than it is for their larger rivals. Big companies can often get discounts because, as with wholesale clubs, they buy in bulk.
Association Health Plans, or AHPs, could give small businesses the same buying power. Businesses would form associations and band together for the sole purpose of shopping for health insurance, though guidelines as to how the businesses would connect are still murky. Questions yet to be answered include whether the businesses all have to be in the same field, or of the same size.
But what the president did acknowledge, says Jim Brown, a Southeast regional spokesman for the National Federation of Independent Business in Nashville, Tenn., is the need for health care to be more affordable.
Legislation has been introduced in both houses of Congress, and Brown says this year may offer the best shot at getting comprehensive small business health insurance legislation passed, given the support in both houses and the voice of the Oval Office.
“Several senators, including South Carolina’s own Jim DeMint, campaigned on small business health care, which bodes well in the Senate because we haven’t seen any bills of this nature ever even come out of committee,” Brown says.
A companion bill to the House bill was introduced in the Senate late last month, and received the support of such normally divergent senators as Olympia Snow, R-Maine, Robert Byrd, D-W.V., and John McCain, R-Ariz.
AHPs would tear down the existing borders between states and allow businesses to band together. The issue is extraordinarily complex, given that each state has different requirements regarding insurance and insurance companies charge differently—even for the same policy—state-by-state.
“By our last count 42 of the 50 state insurance commissioners are against AHPs,” Brown says. “Often it’s an issue of state’s rights, plus there are mandates that each state carries. The mandates are well-intentioned, but they can cause real problems and significantly drive up the cost of health insurance.”
States can mandate that insurers carry coverage for specific diseases and ailments, and each state may mandate coverage for different conditions.
The AHPs as proposed by Bush would break down state barriers and allow, for example, electricians in North and South Carolina to form an association for the sole purpose of shopping for health insurance coverage.
Unused South Carolina law
Ironically, the state of South Carolina already had something akin to association health plans on the books, and has for the past 11 years. However, no companies have taken advantage of it, says Michael Fields, South Carolina state director for NFIB.
According to the laws regarding accident and health insurance, “A common group of small employers may be formed solely for the purpose of obtaining insurance.”
However, there are provisions. Most notably, the group must represent at least 1,000 employed people. Getting 1,000 people from small businesses all across the state to band together for the purpose of buying insurance is akin to herding cats.
“This was the first bill I ever worked on with NFIB, and there seemed to be a lot of interest in getting it passed,” Fields says. “But in the 11 years since, no more than five people in the state have made serious inquiries about it and none have actually followed through and filled out the necessary paperwork to get the ball rolling. Either the law was written in such as way as to not make it beneficial for people to pursue this option, or the business climate isn’t such that this plan makes sense.”
Small business owner Evelyn Perry, who owns Carolina Sound Communications, Georgia Sound Communications in Savannah, and Sound Communications, which is located in Charleston, says she was floored to discover that insurance companies charge differently in one state than they do in another, even if the policy and coverage are the exact same.
“The problem for a small business is that you traditionally don’t have a lot to choose from,” Perry says. “We are an unusual company in that, for our first 19 years owning the companies, we paid 100 percent of our employees’ insurance premiums. But the rates have been going up about 20 percent per year recently, so this past year, we had to ask them for help in defraying the cost.”
She says the idea of Association Health Plans is a good one, because companies will have a stronger negotiating position.
“AHPs may not be the best solution in the world, but at least it gives small businesses options,” she says.
Opponents have a powerful lobby
With most state insurance commissioners opposing the formation of interstate AHPs, the fight their formation faces will be formidable. Insurance commissioners collect insurance premium tax, which is a tax imposed on insurance companies for every premium they collect. If the states were to lose their power to regulate the health insurance within their state, the states would have to develop an entirely new structure through which they could collect that particular tax.
According to South Carolina law, for life insurance, the insurance premium tax is three-quarters of 1% of the total premiums written. For all other types of insurance, the insurance premium tax is 1.25% of the total premiums written.
Most insurance companies oppose the formation of AHPs, for the simple fact that the federated health plans may cost them money.
Insurance companies often offer lower premiums to groups that buy a large number of policies. If the vast majority of companies are small businesses and only buy policies in smaller numbers, the insurance companies can and do charge them higher premiums.
BlueCross BlueShield, which insures or oversees the insurance of about one-third of insured people across the United States, has released a statement opposing the formation of AHPs.
“While (BlueCross BlueShield) has much in common with the president’s approach to address the nation’s health care access and cost challenges, we disagree on one key component—legislation that would create association health plans that are exempt from important state oversight and consumer protections,” the statement reads. “Creating federal AHPs would be disastrous, ultimately resulting in higher premiums for most small employers, unlimited premium increases for sicker workers and a marked increase in health care fraud.”
In fact, BlueCross BlueShield has launched an aggressive media campaign, issuing press releases each time a member of Congress mentions AHPs. When Sen. Jim Talent, R-Mo., helped introduce the Senate Small Business Health Fairness Act, BlueCross BlueShield called the legislation “flawed,” and claimed the legislation would “gut…state protections.”
NFIB refutes those claims, and has gone so far as to rename AHPs Small-Business Health plans.
“This is a huge issue, a major issue,” Brown says. “More than 41 percent of companies with between one and nine employees do not offer health benefits. By contrast 99 percent of large companies do. That has to change.”
Matthew French is a staff writer for the Business Journal. E-mail him at mfrench@crbj.com.
|
E-Mail This Article
Printer-Friendly Version