AHPs again an alternative to rising health costs

Risk & Insurance, May, 2003 by John Otrompke

With control of skyrocketing health care costs once again topping the benefits agenda for businesses large and small, are association health plans an idea whose time has finally come?

Bush administration officials and some backers in Congress including Senators Olympia Snowe, R-Maine and Christopher Bond, R-Mo., think so. House bill H.R. 660, would vest the U.S. Labor Department with regulatory authority over group health plans sponsored by two of the most powerful business lobbies in Washington D.C.: the National Federation of Independent Businesses and the U.S. Chamber of Commerce.

Proponents claim the legislation, which would chop health insurance costs by 5 percent to 20 percent, would make it easier for small. businesses to offer health benefits. Small businesses, the hardest hit by the cost increases, have a tougher time controlling costs compared with larger employers whose costs are rising at a slower rate.

Jessie Brairton, manager of legislative affairs for the National Federation of Independent Businesses, says large health insurers have a monopoly on the small-group market. Small businesses have nowhere to turn for alternatives. "Right now, large insurers control 98 percent of the small group market in Alabama," he says. "Small employers are offered only one choice: a 40-percent increase per year."

The NFIB represents about 600,000 small business owners, who employ an estimated three million people. The Chamber represents three million members. The majority are small businesses, and the business lobbies could negotiate favorable rates for their members.

Opponents claim H.R. 660 amounts to a "multiemployer welfare arrangement" open to fraud, according to one lobbyist for a large health care organization. A similar proposal initiated by the federal government in the 1970s and 1980s left doctors, hospitals and consumers with $123 million in unpaid bills, said Alissa Fox, executive director of policy with the Blue Cross/Blue Shield Association.

In addition, said Fox, the federal proposal would pre-empt the external review requirements imposed by the states. Association health plans could therefore get away with offering very few benefits and attract only the healthiest employees, leading to a tiered health system. "AHPs would tend to attract healthy people, leaving people in state-regulated plans with rapidly-increasing rates," she says.

The bill, which has passed the House on two previous occasions, has more than a half-dozen backers in the Senate.