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Would Help Small Businesses Offer Insurance At Lower Rates
Association Health Plans
Considered In U.S. Congress
by Jonathan Yarowsky
NATO Washington Counsel

"Although most working Americans receive health insurance from their employers, all firms with fewer than 100 employees find it particularly difficult to offer benefits. Just 49 percent of these small businesses offer insurance, compared to 98 percent of larger firms with 100 or more employees.”

– Ann Combs, assistant secretary for employee benefits security at the Department of Labor, speaking before the House Education Subcommittee and the Workforce Subcommittee on Employer-Employee Relations, March 13, 2003.

The Problem: Healthcare in America has become more than just a vexing problem for policymakers in Washington; it has become an overriding concern which has yielded many proposals but, unfortunately, very few real initiatives for businesses and workers alike. According to the U.S. Department of Labor, more than 41 million Americans do not have health insurance. Of those 41 million uninsured, 60 percent are workers at firms with fewer than 100 employees and their families.

The problem is not simply that workers are uninsured. As many NATO members reading this column may well attest, in many cases the problem is that employers at small firms, for a variety of reasons, cannot afford to offer insurance to their workforce. The economics are unmistakable: small firms are generally charged more per employee than large firms for comparable coverage, because they cannot offer a pool of insurers large enough to spread the risk. Exacerbating the cost per employee is the fact that a small firm does not have the financial leverage to negotiate those costs down to the benefit of the employees, and must absorb a comparatively higher percentage of the available budget to administer a health plan.

A Possible Solution?: As a result, members of Congress in both parties have been looking at a variety of ways to insure as many working Americans as possible without creating new, unintentional economic dislocations. One proposal that has garnered increasing attention on Capitol Hill is an arrangement known as Association Health Plans or AHPs. In general, AHPs would allow groups of small employers – defined as having less than 100 employees – to band together through “bona fide” associations to purchase and/or provide health insurance coverage for their employees under the protection of ERISA – rather than under 50 different state regulations. This is an important proposal which would allow NATO to form an AHP and allow all NATO members with fewer than 100 employees to purchase health insurance for their employees at a much lower rate. Under this arrangement, small employers would receive many of the same economic and legal advantages that are currently enjoyed by larger employers. Specifically, AHPs would: 1) provide small employers enhanced bargaining power through the size of the association membership, as well as reduce the administrative costs for the businesses; 2) allow small businesses to enjoy the benefit of a predictable, uniform regulatory system at the federal level; 3) help ensure that small businesses will not be denied insurance coverage or be priced out of the market due to the health status of their employees; and 4) allow associations to assemble coverage that best fits their members’ needs by offering a choice of plans. The one eligibility condition would be that a qualified association would have to be in existence for a minimum of three years for purposes unrelated to simply receiving the new benefits of an AHP. Under these guidelines, NATO would qualify to provide an AHP to its members. In a study conducted by the Office of Management and Budget, up to 4.6 million workers and dependents would potentially gain coverage through the passage of AHP legislation.

Congressional Status/NATO Support: Legislation focusing on AHPs is now pending in both the House and the Senate. In the House, Rep. Ernie Fletcher (R-Ky.) has introduced H.R. 660, the Small Business Health Fairness Act. Hearings have been held on H.R. 660 by the House Education and the Workforce Employer-Employee Subcommittee, which recently approved the bill by a vote of 13-8. H.R. 660 is currently pending before the full Education and the Workforce Committee.

In the Senate, Sen. Olympia Snowe (R-Maine) has introduced companion legislation, S. 545. As chairperson of the Senate Small Business Committee, Snowe convened hearings on the AHP proposal in February and is actively encouraging the committee with legislative jurisdiction – the Senate Health, Education, Labor and Pensions Committee – to move the bill this session.

In support of these efforts, NATO has joined with a number of business groups to form the “Coalition Supporting Access & Choice Through Association Health Plans,” known colloquially as “AHPs Now!” The Coalition has brought together a wide range of groups – from theatre owners to florists to restaurants – to fight for the critical goal of bringing healthcare insurance to millions of citizens across the country. We will work through the coalition to ensure that NATO’s voice – and need – is heard.