Wall St. & Business Wednesdays: Would An Association Health Plan Bill Let Firms Unite To Cut Health Care Costs?

Long-stalled legislation that appears to have picked up momentum in Congress would test just how much Americans are willing to risk to make health insurance more affordable.

For years, congressional Republicans have wanted to let small businesses band together and drive down the cost of health insurance by exempting them from costly state insurance laws, such as those requiring experimental cancer care, substance abuse treatment, mammography screening and patient appeals.

The Republican-controlled House has passed "association health plan" bills seven times in the past nine years, only to see them die in the Senate, where critics were wary of skirting state consumer protection laws. Though Democrats almost uniformly oppose the legislation, the biggest obstacles have been a few key Republicans.

But now a subtle shift in Senate GOP ranks has proponents optimistic of passing a bill they say will help small companies afford health insurance coverage for their workers.

"I believe we will see movement this Congress," said Sen. Olympia Snowe, R-Maine, the Senate bill's sponsor.

Buoying Snowe's optimism was the retirement of a Republican colleague, Sen. Don Nickles, R-Okla., a leading opponent of association health plan legislation. Also, Sen. Judd Gregg, R-N.H., who bottled up the legislation in a Senate health committee, is no longer chairman.

Meanwhile, four new Republican senators are co-sponsors and three others have signaled their support. The addition of Sen. Robert Byrd, D-W.Va., as a co-sponsor was an added benefit, allowing proponents to say the bill is bipartisan.

President Bush gave the bill a boost by mentioning it prominently in his State of the Union speech.

Snowe says the bill fixes a long-standing inequity. Large companies that pay claims themselves, rather than through an insurance policy, are exempt from state insurance mandates. Snowe said small firms offering insurance through association health plans should be treated the same. Her bill would let trade and professional groups, such as the National Restaurant Association, tailor insurance plans to their own needs without having to comply with the patchwork of each state's coverage requirements.

The approach, she said, would drive down insurance costs that have seen double-digit increases in each of the past four years. In doing so, she said, the bill also would throw a lifeline to some of the 48 million uninsured Americans, the majority of whom work for small companies that can't afford premiums that last year averaged $9,950 for a family of four.

"It is ludicrous that we have a two-tiered health insurance system in this country where one group of employers, large ones and those who are union employers, get preferential treatment over those who create 75 percent of the jobs," Snowe said. "I am at a loss to understand why small businesses should be denied the same advantages that these other employers already have."

Snowe said the bill could extend coverage to as many as 8.5 million people, but a Congressional Budget Office study put the figure at a couple hundred thousand. It is backed by the National Federation of Independent Business and hundreds of trade and professional associations with broad grass-roots clout. But it also has attracted powerful opposition from groups normally in step with the Republican agenda.

A leading health insurance trade group, America's Health Insurance Plans, called association health plans "an untested approach (that) will lead to market fragmentation and widespread fraud."

The Blue Cross/Blue Shield Association, whose affiliates are the largest health insurers in more than half the states, has taken the lead in opposing association health plans. It said exempting them from state mandates is unfair to companies, like its own, that must comply. Sponsors of the bill say the insurer is just watching its bottom line and doesn't want the competition that association health plans would generate.

"The Blues welcome competition," said John Parker, director of public affairs. "However, we feel strongly that competition should be predicated on the fact that all insurers are subject to the same rules."

Proponents of the bill also must contend with an influential coalition of states-rights groups, led by the National Governors Association, the National Association of Insurance Commissioners, most state attorneys general as well as consumer groups, that object to overriding state laws guaranteeing minimum health coverage.

Past experiments have been less than encouraging. An earlier law allowing businesses to pool resources to get better insurance rates opened the door to widespread fraud. Hundreds of thousands of people were left with unpaid medical bills when sponsors sold them insurance at cut-rate prices, pocketed the premiums and vanished.

Rep. John Boehner, R-Ohio, the sponsor of the House bill, which is expected to pass in April, said the bill contains tough consumer protections. He said only established organizations could sponsor health plans, keeping fly-by-night outfits out. Each plan also would have to maintain adequate cash reserves, likewise deterring scam artists.

In particular, Boehner and Snowe have touted the bill's prohibitions against health plans selling to the youngest, healthiest workers least likely to file claims, a practice known as "cherry-picking."

They said the U.S. Labor Department will be on the lookout for deceptive practices.

This article appears in The Daily Oakland Press