Bush’s health plan proposal could undermine small businesses
National insurance pools could leave state plan in cold
Just as Wisconsin lawmakers are gearing up to implement a small-business purchasing pool for health insurance, a national plan supported by President George W. Bush may complicate the state effort.
Proposed legislation to allow Association Health Plans (AHPs) to band groups of employers across state lines to form health insurance purchasing pools has been passed by the House of Representatives four times, only to die in the Senate.
However, because of presidential support and soaring health care costs, the legislation is seeing renewed interest in the Senate.
The Senate Committee on Small Business and Entrepreneurship held hearings on AHP legislation Feb. 5. In the meantime, the Small Business Health Fairness Act was reintroduced in the House Feb. 11 and referred to the House Committee on Education and the Workforce.
The bill was co-sponsored by Republican members of the Wisconsin congressional delegation, including Congressmen Tom Petri, Paul Ryan and F. James Sensenbrenner.
According to health care economist Len Nichols, who consulted in January with Wisconsin lawmakers on the formation of a small business health insurance purchasing pool in the state, AHPs would do little for small businesses.
AHPs would “make it hard to get that pool you have in Wisconsin off the ground,” said Nichols, vice president of the Washington, D.C.-based Center to for the Study of Health System Change (CHSC).
AHPs are a tool designed to exempt plans offered by industry-specific associations from state regulation for health insurance.
The most vocal advocates of AHPs have been the U.S. Chamber of Commerce and the National Federation of Independent Business (NFIB). Both associations would likely offer health plans to members if AHPs were to become a reality.
AHP proponents, including NFIB Wisconsin state director Bill Smith, claim the sheer size of a national pool would reduce the cost of insurance for small businesses.
However, Nichols is not convinced.
“I don’t see why it has to be across state lines,” Nichols said. “No small business by definition has employees in two states, so the idea that it is simpler to deal with one set of regulations than 50 is just not applicable to small business.”
Nichols stressed that it is the size of a local pool and its resulting ability to negotiate with local providers that matters.
“The ways to do this that are technically sound and feasible involve pooling in your local area – not pooling nationwide,” Nichols said. “The key to life here is not to create one more special haven that will increase the competition of risk pools already out there.”
>Nichols has an ally in his opposition to the AHPs in Larry Rambo, chief executive officer of Humana’s Wisconsin market. Humana is a major player in small group health insurance in Wisconsin.
“I don’t think that multi-state pools would wind up being very effective, because health care is a local issue,” Rambo said. “Costs are not consistent from city to city, much less state to state. Something like AHPs would mean small businesses in low-cost areas would be subsidizing people in high-cost areas like southeastern Wisconsin. I don’t think small employers are going to be interested in doing that.”
“Health care markets are local — period,” Nichols said. “In Wisconsin alone you look at the variations in costs from one county to the next, and it will convince you. It is about something other than efficiencies for small business.”
That something else may be the desire of associations to offer health coverage as a service to its members. But according to NFIB’s Smith, health insurance is a benefit its members have requested.
“We are interested in AHPs on the basis of fairness,” Smith said. “If you are General Motors or some other big business, you can already do this for your employees nationwide. NFIB or the National Restaurant Association or the National Retail Association, in fairness to these national organizations, we should be able to do this too.”
Smith, who was aligned with small business entities interested in implementing a small-business health insurance purchasing pool in Wisconsin, is straddling a fence between the national and state proposals.
“I would rather keep my options open,” Smith said. “A statewide pool may serve a population that we may not be able to serve. But when the AHP gets into place, obviously that would compete against a state pool.”
That competition may be too much for a fledgling state pool, according to Nichols and Rambo.
“If AHPs came into existence, as proposed in legislation which we testified about, it would put some strain on all small group markets, whether there was an existing pool in place like what is proposed in Wisconsin or not,” Nichols said.
Feb. 21, 2003 Small Business Times, Milwaukee
