Pressure for action on health coverage - small business and health insurance

Nation's Business, May, 1990

Battle lines are being drawn on Capitol Hill over the best way to make health-insurance coverage more available and affordable for small employers. The insurance industry and some lawmakers differ on the extent to which federal regulations should be used to solve current problems.

Legislators advocating a prominent federal role argue that controls are needed to eliminate insurance-industry practices that are driving some small employers out of the health-care market and making it impossible for others to provide health coverage in the first place.

The health-insurance industry says the answer is not in more federal controls, and it has developed a major new initiative to deal with the coverage problems that small firms encounter.

The Health Insurance Association of America (HIAA), the industry's leading trade group, says that under its plan, firms with 25 or fewer workers would not be denied health coverage even if one or more of their employees might be a high risk or uninsurable in today's market. Once insured, neither the group nor an individual in the group would be denied continued coverage because of health problems.

The plan would establish limits on how much premiums and annual premium increases could vary for similar groups.

The plan also calls for a special insurance pool for high-risk individuals.

The HIAA previously had called on Congress to restrict states from regulating the content of health-insurance policies (see next item). And it wants the self-employed to have the same 100-percent tax deduction for health-insurance premiums already available to other businesses. The self-employed now get only a 25-percent deduction.

"This plan represents a fundamental change in the way our industry does business," says Carl J. Schramm, HIAA president.

But it doesn't go far enough in the eyes of some lawmakers.

Proposals for government action to restructure the small-business health-insurance market are being pressed on Capitol Hill as part of legislation that would require all employers to provide health-insurance coverage to employers and their dependents. Its sponsors are Sen. Edward M. Kennedy, D-Mass., and Rep. Henry Waxman, D-Calif.

Under the proposed legislation, insurers would not be allowed to screen for medical risks when setting premium rates.

A bipartisan congressional commission in March also called for an end to the practice of medical underwriting (considering a person's age and health status in setting premiums) and recommended that insurers be required to offer at least one basic health plan to small firms, with coverage defined by federal regulation.

The HIAA will fight to maintain insurers' right to consider an individual's health in setting rates, says Melanie K. Marsh, the organization's manager of consumer affairs.

Marsh also says that insurers oppose any congressionally mandated basic health-insurance package for small firms because, over time, Congress would add expensive mandates to it.

Despite the differences between insurers and lawmakers, there is consensus on much that needs to be done concerning health insurance.

Frederick J. Krebs, manager of business and government policy for the U.S. Chamber of Commerce, notes that the HIAA proposals closely track similar insurance reforms that were proposed last fall by the Chamber's board of directors. "The small-business community is willing to work with the insurance industry to achieve these reforms," Krebs says.