Help for Small Business: Association Health Plans

Why prospects for reforming health care look so dim

Tucked deep within the promises and policies of his State of the Union address, President Bush uttered three words that speak volumes about Washington’s paralysis in addressing the plight of the 41 million Americans who lack health insurance. In between his discourse on Medicare and his support for a low-income health care tax credit, Bush called for something called ”association health plans.”

http://www.usatoday.com/usatonline/20040123/5864880s.htm

These plans allow small businesses to band together into national pools to negotiate discount health insurance rates closer to those available to big corporations. They aren’t a radical idea. Nor would they come close to solving all of the nation’s health care woes. But they would address an important problem: the steep costs small businesses must pay to offer medical coverage. Because they can’t spread their risk throughout a large workforce, they pay higher rates for their insurance. Partly as a result of this limitation, only 49% of small employers offer health insurance, compared with 98% of large companies, according to the U.S. Department of Labor.

Yet even this small, common-sense reform has touched off fierce opposition from powerful groups ranging from Blue Cross and Blue Shield to state health commissioners. They claim it would gut state regulations that consumers need without reducing the ranks of the uninsured.

The controversy raises a vexing question: If one incremental change can set off so many special-interest battles, what hope is there for the broader health care reform the nation needs to extend coverage to all and stem skyrocketing costs for those who have insurance? Currently, one in five individuals lack insurance at some point each year, and premiums have seen double-digit increases for three years in a row.

Bush isn’t the only one who believes association health plans hold promise. In June, the House of Representatives overwhelmingly passed legislation allowing such small business pools. Opposition has blocked action in the Senate.

Both sides claim they are willing to compromise or offer alternative proposals. But in the nine years that small employers have been begging for help, Washington hasn’t responded. Now, the pop from Bush’s Tuesday night speech and a commitment by Senate Majority Leader Bill Frist, R-Tenn., to take up the matter as part of a broader health care package may brighten the outlook.

If so, small businesses, and their employees, could gain numerous new benefits.

Among them:

* Lower costs for insurance. The economies of scale that small businesses could get by banding together would allow them to negotiate lower coverage costs. Since 2000, premiums paid by small business employees have risen an average of 13% a year, compared with 11% for those working for large businesses, according to the Kaiser Family Foundation, a non-profit health research group. In 2003, the inability to find affordable insurance surpassed taxes as the single most troubling issue for small business owners in a survey conducted by the National Federation of Independent Business.

* Greater leverage for patients. Employees of small businesses could have stronger advocates if they encountered problems with their coverage. A large association representing hundreds or thousands of firms would have considerably more sway over insurers than a single employee or his small-businesses employer.

The Blue Cross and Blue Shield Association argues that such plans would ”cherry pick” the healthiest employees and leave the sickest, most expensive patients in existing insurance pools that would have to pay higher rates. It also says associations would be exempt from state regulations, stripping consumers of protections from unscrupulous insurers.

The worries, while valid, could be addressed without killing an otherwise-promising idea. Federal oversight of health insurance does need strengthening. A good place to start would be with a patients’ bill of rights that guarantees consumers a more effective avenue of appeal when their claims are denied. That reform also is stalled in the Senate because of opposition from insurers.

Both sides in the association debate have their own interests to protect. Insurers such as Blue Cross and Blue Shield don’t want to cede leverage to their customers to negotiate better deals. On the other side, small businesses don’t want the hassle and expense of dealing with state health regulations, even those that protect patients. Yet, instead of working to find common ground, both sides have dug in.

Their feuding is a microcosm of the larger problems facing health-reform proposals. Health care is now a $1.5 trillion business and represents 15% of the entire economy. With such enormous sums at issue, the public’s needs too often give way to protecting special interests.

Until all sides commit to compromise, change can’t occur. A good way to break the logjam is to start modestly: working together to help the small employers that are among the most hard-pressed in the current health care climate. That small success could serve as an important model for addressing bigger health care issues on the horizon.Today’s debate: Expanding access to medical coverageEven plans to help small employers ignite special-interest fights.

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Plans would hurt consumers

By Scott P. Serota

http://www.usatoday.com/usatonline/20040123/5864884s.htm

”Association health plans” (AHPs) sound too good to be true. And they are. AHPs offer little help to employers and would strip away critical state consumer protections from coverage sold to small employers — with no replacement.

The nation must deal with the problem of the uninsured — especially small employers that often have small profit margins and low-wage workers who can’t afford their share of the premiums. As part of our continuing efforts to keep health care affordable, Blue Cross and Blue Shield has proposed a comprehensive range of legislative options that would help employers offer coverage and employees pay their share.

The deregulation of insurance companies that sell to association groups — the AHP proposal — would put consumers at risk and destroy any confidence that their health plan will be there to pay the bills.

Thousands of AHPs exist today and benefit their members by ”banding together” to purchase coverage. However, they are regulated by the states. It’s a bad idea for Congress to roll back consumer protections that apply to insurers that contract with these associations. Consumers have demanded these protections to ensure the security and dependability of their coverage.

One very important state protection ensures that groups with higher costs — those with older or sicker workers — are not victims of unlimited and frequent (monthly) premium increases. Contrary to some claims, these rules would not apply to the proposed AHPs. Studies by the Congressional Budget Office and others show that under this scheme, premiums increase for most firms, and older and sicker groups lose coverage altogether. Other key protections also would be abandoned: the right to appeal to an independent third party when a claim is denied, access to medical specialists and emergency room care.

Some argue the proposal should at least be tried. However, governors, state legislators, attorneys general and insurance commissioners are opposed; they know unregulated AHPs have been tried and failed miserably. The experiment resulted in rampant fraud and abuse that left consumers and providers with $123 million in unpaid medical bills. States once again would have to deal with the resulting disaster. They, not Washington, would have to explain to a family why it lost important protections.

Along with state officials, 900 organizations — from local Chambers of Commerce to farm bureaus — and hundreds of thousands of small businesses oppose this proposal. The American Nurses Association, American Academy of Pediatrics and American Diabetes Association also are opposed; they ask who will step in for the states to ensure that mammograms, diabetic supplies and preventive care are covered. All agree that unregulated AHPs are bad public policy.

Scott P. Serota is president and CEO of the Blue Cross and Blue Shield Association, the trade group representing 41 Blue Cross and Blue Shield companies.

Coverage isn’t guaranteed. Older, sicker workers could lose benefits.