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Association health plans, August 2001

What steps can be taken to increase access to quality health care while controlling the rising costs of health insurance for small-business employees and their families?

Why it's important

According to the Employee Benefit Research Institute, 60 percent of the 43 million uninsured Americans are either self-employed or work for small businesses. This is because rising costs and increased regulations have made it more difficult for small-business owners to offer health insurance. Small businesses do not achieve the same economies of scale, purchasing clout and administrative efficiencies through health plans that currently are available to Fortune 500 companies and labor unions.

On Aug. 2, the House passed the Bipartisan Patient Protection Act (HR 2563), by a vote of 226-203, with two important amendments. The first amendment places reasonable limits on lawsuits. The second, concerning access to health insurance, has a provision for association health plans (AHPs), which would make it easier for an association to offer affordable health insurance to its members nationwide. Both amendments are in stark contrast with the Senate's version, dubbed the Patients' Bill of Rights. This version has relaxed liability limits and excludes meaningful access provisions, such as AHPs.

An AHP provision, similar to the one in the House bill, would amend the Employee Retirement Income Security Act (ERISA) to allow small companies to form insurance pools across state lines under the management of associations, such as NRCA. AHPs would be subject to strict sponsor-eligibility requirements, including financial and other reporting criteria for the protection of consumers. In addition, AHPs could not discriminate against an employer member based on the health status of employees, previous claims or risk associated with the employer's business.

Key components of the AHP provision:
  • Small businesses, through bona fide trade and professional associations, would be able to negotiate better, more affordable agreements with insurance providers, which larger companies and labor unions currently enjoy.
  • Small businesses would have the flexibility to choose the coverage they want, including uniform benefits across state lines.
  • AHPs would be registered as ERISA plans with the U.S. Department of Labor and subject to state oversight. However, costly state-mandated benefits would be superceded, thus enabling small businesses to save an estimated 30 percent in overhead costs.
NRCA's position

NRCA supports AHP legislation because it would give small businesses access to affordable health insurance for millions of uninsured workers and families.

The other side

Opponents of the legislation suggest that it would be difficult to hold AHPs accountable to enrollees because the plans would not be regulated by individual states.

(August 2001)

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