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Association health plans, September 2003


NRCA urges Congress to pass the Small Business Health Fairness Act of 2003 (H.R. 660/S. 545), legislation that would allow bona fide trade, business and professional associations to provide quality, affordable health benefits through association health plans (AHPs) to their respective small-business members nationwide.


Nearly 42 million Americans lack health insurance, and approximately 60 percent of the uninsured work for or reside in a family employed by a small business. The problem for the uninsured and underinsured is that many small-business owners do not have access to affordable health coverage because of rising costs and stringent regulations. In the current regulatory environment, 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 average, small-business employers face premiums that are 30 percent higher than those of large, self-insured companies.

For close to 30 years, large and medium size multistate companies, as well as labor unions, have been able to provide group health coverage across state lines for their employees under the Employee Retirement Income Security Act (ERISA) of 1974. ERISA plans, which are administered by the U.S. Department of Labor (DOL), have helped large companies and labor unions drive down health-care costs while providing universal coverage for their employees and families. Today, more than 115 million Americans are covered by ERISA plans. Unfortunately, those working in small businesses are not.

In an effort to level the playing field, the House took a major step forward June 19 as Republicans and Democrats joined together to pass H.R. 660, which would permit the creation of federally sanctioned AHPs. The bill passed decisively by a 262-162 margin with 36 Democrats joining all but one Republican in support of the measure. Companion legislation (S. 545) awaits action in the Senate, where eight senators have cosponsored the bill.

Policy benefits
  • More Americans Insured: DOL estimates that passage of AHPs would result in health insurance coverage for as many as 8.5 million uninsured Americans. By providing small businesses the same purchasing power and federal regulatory structure enjoyed by large employers and Taft-Hartley union plans, AHPs would offer small businesses administrative efficiencies, larger economies of scale, greater bargaining power with insurers and providers, and new and competitively priced coverage options.

  • Consumer Protection: AHPs would be registered as ERISA plans with DOL and subject to sponsor-eligibility requirements, including financial and reporting criteria that are more stringent than required of current ERISA plans. 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. However, costly state-mandated benefits would be superceded, enabling small businesses to save an estimated 30 percent in overhead costs.

  • Fiscal Responsibility: AHPs would expand coverage through private market mechanisms without new taxes or revenue outlays. With the return of federal budget shortfalls, AHPs are the most responsible public policy option currently under consideration to cover working uninsureds.

(September 2003)

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